Soho House deal will take club private

LONDON – Once one of the hottest hospitality brands in the world with its exclusive club membership-hotel model, now struggling Soho House has agreed to a $2.7 billion deal to go private with New York City-based MCR Hotels leading a group of new equity investors and the existing shareholders rolling their majority shares in the 46-property business.

The new investors will pay $9 a share for about 15% of the Soho House & Co shares that trade on the NYSE, a 17.8% premium to the closing price on Friday. Soho House said the deal implies an enterprise value of about $2.7 billion, including $700 million of debt. The proposed transaction is expected to close by the end of 2025.

Funds managed by affiliates of Apollo are supporting the transaction through a hybrid capital solution, by providing additional capital in the form of debt and common equity, a portion of proceeds will be used to refinance the company’s existing senior secured notes. The Wall Street Journal had reported on Sunday that Apollo was expected to provide more than $700 million in equity and debt financing.

Under the new arrangement, Soho House Founder Nick Jones and Executive Chairman Ron Burkle and his investment firm Yucaipa will retain majority control of the business, which is reportedly about a 75% stake.

Our shared goal is to safeguard the member experience, drive sustainable international growth for House members, and protect and expand the cultural and creative foundation that has made Soho House a global industry leader.

Tyler Morse

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Existing significant shareholders, including Richard Caring and Goldman Sachs Alternatives, will also roll the majority of their shares of the common stock of the company. Goldman Sachs Alternatives is also committing additional capital. Hybrid Capital at Goldman Sachs Alternatives has been invested in Soho House since 2021, reportedly currently holding an 8% stake, and said it will continue to support the business through this transaction.

Further equity capital will be provided by a consortium of strategic investors, including actor and noteworthy tech investor Ashton Kutcher, who will join Soho House’s board of directors.

MCR CEO Tyler Morse will become vice-chair and the company also named hospitality veteran Neil Thomson as chief financial officer to succeed Thomas Allen effective immediately.

“MCR’s investment in Soho House represents a strategic opportunity to combine our operational expertise with one of the most distinctive brands in hospitality,” Morse said. “Our shared goal is to safeguard the member experience, drive sustainable international growth for House members, and protect and expand the cultural and creative foundation that has made Soho House a global industry leader. Together, we are confident in our ability to deliver long-term value for members, employees and shareholders alike.”

Soho House was founded in London in 1995 and today operates 10 locations there and 46 around the world. It has four clubs in Los Angeles and three in New York. It has been expanding the global footprint, welcoming new members into Houses in creative and culturally important cities such as São Paulo, Mexico City, Nashville and Paris. Four additional Houses are due to come online in the near term.

There are also eight Soho Works, Scorpios Beach Clubs in Mykonos and Bodrum, interiors and lifestyle retail brand Soho Home, as well as digital channels. The Ned in London, New York and Doha, The Line and Saguaro hotels in North America also form part of Soho House & Co’s wider portfolio.

The company reportedly lost a cumulative $739 million in the four years it has been publicly listed, although it has made net profits in its past three quarters.

Hedge fund manager Daniel Loeb, whose firm Third Point owns a nearly 10% stake in Soho House and pushing for a sale, on Monday told Reuters he is pleased with the planned move and supports the deal.

“This transaction reflects the strong confidence our existing and incoming shareholders have in the future of Soho House & Co., and the transformation we’ve led since becoming a public company,” said Andrew Carnie, CEO of Soho House & Co. “Since our IPO in 2021, we’ve focused on building a stronger, more resilient business. Against a backdrop of challenging economic conditions and global uncertainty, from 2022-2024 we delivered consistent, disciplined growth with revenue increasing at an average annual rate of double-digit growth, and Adjusted EBITDA growing at over 50% annually during the same period.”