Hyatt finalizes deal for Playa Hotels & Resorts

CHICAGO – Hyatt Hotels Corp. has entered into an agreement to acquire all outstanding shares of all-inclusive owner-operator Playa Hotels & Resorts N.V. for $13.50 per share, or approximately $2.6 billion, including approximately $900 million of debt, net of cash. The deal will deliver to Playa shareholders a 40% premium to the company’s unaffected stock price prior to the disclosure of exclusive discussions with Hyatt.

Asset-light Hyatt intends to identify third-party buyers for Playa’s owned properties. Following the close of the transaction, Hyatt anticipates realizing at least $2 billion of proceeds from asset sales by the end of 2027 and expects asset-light earnings to exceed 90% on a pro forma basis in 2027.

At closing, Hyatt expects to fund 100% of the acquisition with new debt financing and expects to pay down over 80% of the new debt financing with proceeds from asset sales. The acquisition is anticipated to close later this year.

Hyatt is currently the owner of 9.4% of Playa’s outstanding shares, which results in a net purchase price of ~$2.47 billion (before estimated transaction costs).

Playa currently owns and/or manages 24 resorts (8,627 rooms) in Mexico, Jamaica, and the Dominican Republic under the following brands: Hyatt Zilara, Hyatt Ziva, Hilton All-Inclusive, Tapestry Collection by Hilton, Wyndham Alltra, Seadust, Kimpton, Jewel Resorts and The Luxury Collection. Seventeen are owned properties, eight of which are Hyatt Ziva/Zilara resorts that R.W. Baird's Michael Bellisario said generated $36.4 million of trailing 12 months (TTM) franchise fees for Hyatt. Third-party management fees totaled just under $6 million on a TTM basis.

"What happens to the competitor-branded resorts (seven owned, five managed)? Can Hyatt terminate and rebrand these? At what cost?" Bellisario asked in his note on Monday morning.

Bellisario further wrote that Playa's 2024E Adjusted EBITDA guidance is $250-$255 million. He added that Hyatt did not disclose financial metrics or potential synergies, which should be significant, including reduced SG&A, more efficient marketing spend, and expanded distribution through ALG Vacations and Unlimited Vacation Club.

Truist Securities analyst C. Patrick Scholes did some interesting math homework related to Hyatt taking real estate assets into hand short term. He said, assuming Hyatt can sell the real estate at valuation multiples above where they were acquired, this transaction has the potential for being a good deal for Hyatt.

“Back of the envelope math if Hyatt buys Playa at 10x and sells the hotels,” Scholes wrote. “We estimate that each 100 bps. of EBITDA multiple that Hyatt sells the owned hotels above our assumed 10x multiple at which Hyatt buys Playa equates to approx. $3 in share price accretion for Hyatt.

“However, this is just for the hotel/real estate sales themselves and the accretion could easily be higher as it is likely Hyatt will either maintain a management and/or franchise contract on any sold properties. We ballpark around $20 million in annual management/franchise fees added post asset sales which assumes sold hotels all receive a management and/or franchise contract, something Hyatt has almost always gained with a hotel sale.”

 

Scholes further posited that the acquisition by Hyatt would eliminates a third-party manager competitor, they may benefit from any Playa operational learnings, gives Hyatt furthers control of Ziva and Zilara brands without Playa and they would benefit from renovated hotels in Pacific and Zilara Cancun with Playa for now assuming some of the CapEx spend.

The pending acquisition provides an opportunity to secure long-term management agreements for Hyatt’s luxury all-inclusive Hyatt Ziva and Hyatt Zilara branded properties. It also will expand Hyatt’s distribution channels, including ALG Vacations and Unlimited Vacation Club, to Playa’s portfolio.

This pending acquisition further cements Hyatt’s leadership in the all-inclusive space, having acquired Apple Leisure Group in 2021. Last year, it completed a 50/50 strategic joint venture with Grupo Piñero, which added the Bahia Principe Hotels & Resorts portfolio to Hyatt’s Inclusive Collection. Hyatt currently has approximately 55,000 all-inclusive rooms across Latin America, the Caribbean and Europe.

In connection with the transaction, BDT & MSD Partners is acting as lead financial advisor to Hyatt with Berkadia serving as Hyatt’s real estate advisor. BofA Securities, J.P. Morgan, and Wells Fargo are also acting as financial advisors to Hyatt and have also provided fully committed bridge financing in relation to the transaction. Latham & Watkins LLP is Hyatt’s legal advisor.

PJT Partners LP is serving as financial advisor to Playa Hotels & Resorts and Hogan Lovells and NautaDutilh N.V. are serving as legal counsel.