Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – relief from prospectus requirement to allow U.S. parent company to spin-off shares of two of its U.S. subsidiaries to investors – distributions not covered by legislative exemptions – U.S. parent company is a public company in the U.S. but is not a reporting issuer in Canada – U.S. parent company has a de minimis presence in Canada – following the spin-off, U.S. subsidiaries will become independent public companies in the U.S. and will not be reporting issuers in Canada – no investment decision required from Canadian shareholders in order to receive distributions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5., as am., ss. 53, 74(1).

October 7, 2016

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the “Jurisdiction”)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
HILTON WORLDWIDE HOLDINGS INC.
(the “Filer”)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the “Legislation”) for an exemption (the “Exemption Sought”) from the prospectus requirement of section 53 of the Securities Act (Ontario) in connection with the proposed distribution (the “Spin-Off”) by the Filer of the shares of common stock (“Park Shares”) of Park Hotels & Resorts Inc. (“Park”) and shares of common stock (“HGV Shares”) of Hilton Grand Vacations Inc. (“HGV”), each a wholly-owned subsidiary of the Filer, by way of a dividend in specie to holders (“Filer Shareholders”) of shares of common stock of the Filer (“Filer Shares”) resident in Canada (“Filer Canadian Shareholders”).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a)           the Ontario Securities Commission is the principal regulator for this application; and

(b)           the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (“MI 11-102”) is intended to be relied upon in each of the other provinces and territories of Canada.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer.

1.             The Filer is a corporation incorporated in Delaware with principal executive offices in McLean, Virginia, U.S.A. The Filer is a global hospitality company with managed, franchised, owned and leased hotels and timeshare properties in 104 countries and territories.

2.             The Filer is not a reporting issuer, and currently has no intention of becoming a reporting issuer, under the securities laws of any province or territory of Canada.

3.             The authorized capital stock of the Filer consists of 30 billion Filer Shares, U.S.$0.01 par value per share, and 3 billion shares of preferred stock, U.S.$0.01 par value per share. As of July 22, 2016, there were 989,776,458 Filer Shares and no preferred shares issued and outstanding.

4.             The Filer Shares are listed on the New York Stock Exchange (the “NYSE”) and trade under the symbol “HLT”. Other than the foregoing listing on the NYSE, no securities of the Filer are listed or posted for trading on any exchange or market in Canada or outside of Canada. The Filer has no present intention of listing its securities on any Canadian stock exchange.

5.             The Filer is subject to the United States Securities Exchange Act of 1934, as amended from time to time (the “1934 Act”), and the rules, regulations and orders promulgated thereunder.

6.             Based on a “Certified Shareholder List” provided by Wells Fargo, as of March 15, 2016, there were 0 registered Filer Canadian Shareholders holding Filer Shares. The Filer does not expect this number to have materially changed since that date.

7.             Based on a “Geographic Analysis – Canada” of beneficial shareholders prepared for the Filer by Broadridge Financial Services, Inc., as of July 26, 2016 there were 1,149 beneficial Filer Canadian Shareholders, representing approximately 1.3% of the beneficial holders of Filer Shares worldwide, holding approximately 2,654,104 Filer Shares, representing approximately 0.27% of the outstanding Filer Shares. The Filer does not expect these numbers to have materially changed since that date.

8.             Based on the information above, the number of registered and beneficial Filer Canadian Shareholders and the proportion of Filer Shares held by such shareholders are de minimis.

9.             The Filer is proposing to spin off, through a series of transactions, (i) the bulk of its real estate business (the “Park Business”) into a newly formed independent company, Park, and (ii) its timeshare business (the “HGV Business”) into a newly formed independent company, HGV. These transactions are expected to result in the Spin-Off by the Filer, pro rata to its shareholders, of 100% of the Park Shares and HGV Shares outstanding immediately prior to such distribution.

10.          Park is a Delaware corporation with principal executive offices in McLean, Virginia, U.SA. It is currently a wholly-owned subsidiary of the Filer that, at the time of the Spin-Off, will hold, directly and through its subsidiaries, the Filer’s Park Business.

11.          HGV is a corporation incorporated in Delaware with principal executive offices in Orlando, Florida, U.S.A. It is currently a wholly-owned subsidiary of the Filer that, at the time of the Spin-Off, will hold, directly and through its subsidiaries, the Filer’s HGV Business.

12.          As of the date hereof, all of the issued and outstanding Park Shares and HGV Shares, being 1,000 Park Shares and 100 HGV Shares, are held directly or indirectly by the Filer, and no other shares or classes of stock of Park or HGV are issued and outstanding.

13.          The Filer will not distribute fractional shares of Park Shares or HGV Shares in connection with the Spin-Off. Instead, the distribution agent will aggregate fractional shares into whole shares, sell such whole shares in the open market at prevailing market prices and distribute the aggregate net cash proceeds (i.e. net of withheld taxes, brokerage fees and other expenses) pro rata to each Filer Shareholder who would otherwise have been entitled to receive fractional shares.

14.          Filer Shareholders will not be required to pay any consideration for Park Shares or HGV Shares, or to surrender or exchange Filer Shares or take any other action to receive their Park Shares or HGV Shares. The Spin-Off will occur automatically and without any investment decision on the part of Filer Shareholders.

15.          Subject to the satisfaction of certain conditions, it is currently anticipated that the Spin-Off will become effective on or about November 1, 2016. Following the Spin-Off, each of Park and HGV will cease to be a subsidiary of the Filer.

16.          Park will apply to have the Park Shares listed under the symbol “PK”, and HGV will apply to have the HGV Shares listed under the symbol “HGV”, on the NYSE before the Spin-Off.

17.          After the completion of the Spin-Off, the Filer will continue to be listed and traded on the NYSE.

18.          Neither Park nor HGV is a reporting issuer in any province or territory in Canada nor are their securities listed on any stock exchange in Canada. Neither Park nor HGV have any present intention to become a reporting issuer in any province or territory of Canada or to list their securities on any stock exchange in Canada after the completion of the Spin-Off.

19.          The Spin-Off will be effected under the laws of the State of Delaware.

20.          Because the Spin-Off will be effected by way of a dividend of Park Shares and HGV Shares to Filer Shareholders, no shareholder approval of the proposed transaction is required (or being sought) under Delaware law.

21.          In connection with the Spin-Off, each of Park and HGV has filed with the United States Securities and Exchange Commission (the “SEC”) a registration statement on Form 10 under the 1934 Act, detailing the proposed Spin-Off. Each of Park and HGV initially filed their registration statements with the SEC on June 2, 2016, subsequently filed amendments thereto on July 7, 2016 and August 18, 2016, and will file further amendment(s) to their registration statements (collectively, the “Registration Statements”) closer to the date of the Spin-Off.

22.          After the SEC has completed its review of the Registration Statements, Filer Shareholders will receive a copy (or a notice of internet availability) of an information statement with respect to each of Park and HGV (collectively, the “Information Statements”) detailing the terms and conditions of the Spin-Off and forming part of the Registration Statements. All materials relating to the Spin-Off sent by or on behalf of the Filer, Park and HGV in the United States (including relating to the Information Statements) will be sent concurrently to Filer Canadian Shareholders.

23.          The Information Statements will contain respective prospectus level disclosure about Park and HGV.

24.          Filer Canadian Shareholders who receive Park Shares and HGV Shares pursuant to the Spin-Off will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Spin-Off that are available to Filer Shareholders resident in the United States.

25.          Following the completion of the Spin-Off, Park and HGV will be subject to the requirements of the 1934 Act and, if listed for trading on the NYSE, its rules and regulations. Each of Park and HGV will send concurrently to holders of Park Shares and HGV Shares, respectively, resident in Canada the same disclosure materials required to be sent under applicable United States securities laws to holders of Park Shares and HGV Shares, respectively, resident in the United States.

26.          There will be no active trading market for the Park Shares or HGV Shares in Canada following the Spin-Off and none is expected to develop. Consequently, it is expected that any resale of Park Shares or HGV Shares distributed in connection with the Spin-Off will occur through the facilities of the NYSE or any other exchange or market outside of Canada on which the Park Shares or HGV Shares may be quoted or listed at the time that the trade occurs or to a person or company outside of Canada.

27.          The Spin-Off to Filer Canadian Shareholders would be exempt from the prospectus requirement pursuant to subsection 2.31(2) of National Instrument 45-106 Prospectus Exemptions but for the fact that neither Park nor HGV is a reporting issuer under the securities legislation of any jurisdiction in Canada.

28.          None of the Filer, Park nor HGV is in default of any securities legislation in any jurisdiction of Canada.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the first trade in the Park Shares or the HGV Shares acquired pursuant to the Spin-Off will be deemed to be a distribution unless the conditions in section 2.6 or subsection 2.14(1) of National Instrument 45-102 Resale of Securities are satisfied.

“Christopher Portner”
Ontario Securities Commission
“Anne Marie Ryan”
Ontario Securities Commission