Soho House has announced an impressive payout of $9 per share for its shareholders, representing a remarkable 17.8% premium over the company's last closing price. Following this announcement, Soho shares surged by more than 15%, trading at approximately $8.80 in early afternoon sessions. This significant movement in share price has caught the eye of investors and market analysts alike.
In a strategic move to bolster its leadership, actor and tech investor Ashton Kutcher will be joining the board of Soho House as part of the deal. Additionally, hospitality industry veteran Neil Thomson will take over as the new chief financial officer, succeeding Thomas Allen immediately. These changes are seen as crucial in navigating the challenges faced by the company.
Despite the excitement surrounding the leadership changes and the share payout, industry experts caution that Soho House may need more than just celebrity involvement to ensure its long-term viability. Susannah Streeter, head of money and markets at Hargreaves Lansdown, emphasized that the rapid expansion of Soho House has raised concerns about its once-coveted 'exclusive' label. The hospitality industry is currently experiencing a broader consumer spending pullback, which poses additional challenges for Soho, especially since the club relies heavily on in-house purchases, including meals and entertainment.
Soho House was founded in 1995 by restaurateur Nick Jones in London, specifically on Greek Street above his restaurant, Cafe Boheme. Originally designed as a meeting place for creative individuals, Soho House has expanded its operations across Europe, North America, and Asia. However, less than three years after its listing in New York, the company began exploring the possibility of going private due to challenges in achieving profitability, despite a consistent growth in membership and revenue.
Hedge fund manager Daniel Loeb, whose firm Third Point holds nearly a 10% stake in Soho, has publicly expressed his support for the planned move to go private. In a statement to Reuters, Loeb remarked, "As both a shareholder and Soho House member, I support this transaction and am pleased to see management of the club in good hands."
Under the new agreement, MCR Hotels will acquire Soho's publicly traded shares. Notably, founder Nick Jones and Executive Chairman Ron Burkle, along with his investment firm Yucaipa, will maintain majority control of the business. Together, Jones and Burkle own approximately 75% of the company, ensuring that the original vision for Soho House remains intact.
Apollo CEO Marc Rowan recently indicated that the firm anticipates hybrid financing—a blend of debt and equity—to become its fastest-growing business segment. Apollo partner Reed Rayman highlighted to Reuters that these financing structures are enabling Apollo to expand its portfolio significantly. "Hybrid allows us to participate in situations where Apollo as a firm would never have participated," Rayman noted.
Overall, Apollo's contribution to the deal is estimated to be worth around $850 million in both debt and equity, showcasing a strong commitment to the future of Soho House.
This transaction marks a significant chapter for Soho House as it navigates a complex landscape in the hospitality industry, balancing shareholder interests with operational challenges.
