Each edition of The Deep Dive unpacks a new idea sourced from our online community of value investors. In this issue, we explore the Host Marriott / Marriott International spin-off case study from You Can Be a Stock Market Genius.
In 1992, Marriott Corporation faced a serious debt problem tied to its struggling hotel real estate. To solve it, the company split in two: it spun off the debt-laden hotel properties into Host Marriott, while placing its high-margin, low-debt hotel management business into Marriott International. This clever move, led by then-CFO Stephen Bollenbach (who later became Host’s CEO), meant many institutional investors dumped Host shares—not because of fundamentals, but because it no longer fit their mandates.
Yet insiders stayed committed: Bollenbach took charge, the Marriott family kept 25% of both companies, and Marriott International gave Host Marriott a $600 million credit line, reducing the risk of failure. Since Host’s stock traded at just $3 to $5 while carrying $20 to $25 per share in debt, even small gains in asset value could drive massive equity upside — making it the kind of highly leveraged spinoff Joel Greenblatt highlights as a prime opportunity.
As expected, the stock was heavily sold off, and then quickly rebounded — nearly tripling in four months — showing how misunderstood restructurings can deliver big returns to patient, contrarian investors.
