Starwood Hotels & Resorts Worldwide Inc., owner of the Sheraton and W brands, climbed the most in five years after announcing plans to spin off its timeshare business into a new publicly traded company.

The hotel operator gained 9.6 percent to $78.08 at 11:31 a.m. in New York. The shares rose as much as 9.7 percent earlier Tuesday, the biggest gain since August 2009.

The spinoff is part of Starwood’s plan to cut its real estate holdings and focus on property management and franchising. The company’s recent dispositions include the Sheraton on the Park in Sydney, which it sold for A$463 million ($399 million) to China’s Sunshine Insurance Group, Starwood said in November.

“This is the right time for us to spin off our vacation ownership business and move Starwood forward in its asset-light strategy,” Chief Executive Officer Frits van Paasschen said in a statement.

The spinoff is likely to be tax-free to Starwood investors, the Stamford, Connecticut-based company said. It plans to distribute the new company’s stock to existing Starwood shareholders.

“The spinoff is absolutely a positive because it removes a cash-drag business from them,” Nikhil Bhalla, an analyst at FBR & Co. in Arlington, Virginia, said in a telephone interview. “The vacation-ownership business requires continuous investments in the existing properties and development of new ones.”

The new company, whose name hasn’t been disclosed, will have a licensing agreement to continue using Starwood’s Westin and Sheraton brands. Matthew Avril, who retired as president of Starwood’s hotel group in 2012, will head the spun-off company, which had about $640 million of revenue last year. The spinoff, scheduled for completion by the end of the year, doesn’t require a shareholder vote.

Earnings Rise

Starwood also announced fourth-quarter earnings today. The company reported net income of $1.33 a share, up from 68 cents a year earlier. The average estimate of nine analysts was 76 cents a share, according to data compiled by Bloomberg. Revenue fell to $1.49 billion from $1.51 billion.

Starwood forecast growth in revenue per available room, an industry measure of occupancy and rates, of 5 percent to 7 percent worldwide without adjustment for currency fluctuations.

“If the spinoff was not announced today, we think the shares would have been down on a rather disappointing outlook,” Bhalla said.

This article was written by Nadja Brandt from Bloomberg and was legally licensed through the NewsCred publisher network.

Photo Credit: Sheraton Desert Oasis in Scottsdale, AZ. Starwood Hotels