Marriott Corporation split into two companies: Host Marriott Corporation and AN Marriott International. Host Marriott retained ownership of the corporation’s vast hotel and other properties, while Marriott International, rather than owning hotels, managed

— them. The purpose of this split was to free Marriott International from the “baggage” associated with Host Marriott, thus allowing it to be more aggressive in its pursuit of growth.

The following information (in millions) is provided for each corporation for their first full year operating as independent companies.

The two companies were split by the issuance of shares of Marriott International to all shareholders of the previous combined company. Discuss the nature of this transaction.
Calculate the debt to assets ratio for each company.
company.
Calculate the return on assets and return on common stockholders’ equity for each The company’s debtholders were fiercely opposed to the original plan to split the two companies because the original plan had Host Marriott absorbing the majority of the company’s debt. They relented only when Marriott International agreed to absorb a larger share of the debt. Discuss the possible reasons the debtholders were opposed to the plan to split the company.

Transcribed Image Text:

Host Marriott Marriott International Sales revenue $1,501 $8,415 Net income (25) 200 Total assets 3,822 3,207 Total liabilities 3,112 2,440 Common stockholders' equity 710 767