Rumors surface about suitor to take Soho House private

NEW YORK CITY – As Soho House reported 2023 full-year losses of $118 million for 2023 earlier this week, rumors have surface about investment firm CC Capital being among suitors in talks to take the members club private.

Reuters reported that its sources said CC Capital’s Chinh Chu has been in ongoing discussions but the potential for a deal remains uncertain. This comes a month after Soho House leadership said it had formed a special board committee to explore taking the company private.

On Tuesday, Soho House Chairman Ron Burkle published an open letter to shareholders said he would be rolling his stake in any deal, while at the same time bemoaned the group’s valuation at about $1.8 billion, including debt. The group has lost more than 55% of its value since going public in New York in 2021.

“When we went public, I believed the market would reward growth, but it seemed to quickly switch to rewarding free cash flow and profit over our top-line growth. So at this point in time, we have all the costs of being a public company with few benefits,” he said.

Burkle went on to say in the letter that “it’s hard to read that we aren’t profitable when our Houses are very profitable and create tremendous long-term value as an in-place network.

Public companies always have a tug of war over short term vs. long term profits. I’d again emphasize that this (to me) should be about value creation more than anything.

Ron Burkle

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“I feel the real focus should be on mature Houses that are in their second 5-year period of their growth curve, when the profitability and durability of the units really kicks into gear.

“With approximately half our Houses still less than five years old, we have substantial embedded value that will grow as those Houses mature, even before adding a single new House.

“Our post five-year Houses contribute on average 35% plus House-Level margin, with some of our oldest Houses well above that, making the network more valuable with time. This a unique and really compelling feature of the business model.

“Public companies always have a tug of war over short term vs. long term profits. I’d again emphasize that this (to me) should be about value creation more than anything.”

Burkle's investment firm Yucaipa and Soho House founder Nick Jones collectively own about three-quarters of the company. Today, Soho House is an international collection of 41 Soho Houses, 9 Soho Works, The Ned in London, New York, and Doha, Scorpios Beach Club in Mykonos, Soho Home – a homeware and interior design brand – Soho Skin - a skincare brand and our digital channels. The LINE and Saguaro hotels in North America also form part of Soho House & Co’s broader portfolio.

Burkle said the board has “bought back so much of the small float that at today’s stock price the company can almost go private without any of us writing a check.”

Burkle added that the board was shocked on Friday when they learned certain information from the special committee process had been leaked. “Neither the broader Board nor management have been part of the special committee process, making this potential leak particularly concerning to us, and warranted this statement.

“To be clear, I’m not part of any bid at this time, but any proposal that may be on the table requires me to roll my shares. Hence the current need for a special committee.

“In layman’s terms, the process is that the independent special committee is advised by their bankers and lawyers as to the appropriateness and the fairness of any proposal. Then I have to agree to contribute my shares at that value. Then the independent Board votes and then the minority shareholders vote, requiring a ‘majority of the minority.’”