INTERPRETING FINANCIAL STATEMENTS:
Problem: Marriott Corporation split into two companies: Host Marriott Corporation and 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.
Host Marriott Marriott International
Sales $1,501 $8,415
Net income (25) 200
Total assets 3,822 3,207
Total liabilities 3,112 2,440
Stockholders’ equity 710 767
Instructions
(a) 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.