Soho House, the exclusive high-end members club operator, is set to go private in a significant $2.7 billion deal spearheaded by New York-based MCR Hotels. This move culminates a period of turbulent market performance and persistent financial struggles that had seen nearly half of the company's value erased since its initial public offering in 2021.

Terms of the Agreement and Leadership Changes

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Under the terms of the agreement, shareholders of Soho House will receive $9 per share, representing a 17.8% premium over the closing price on the Friday prior to Monday's announcement. Following the news, the company's shares saw a 16% jump in premarket trading, reaching $8.86. Alongside the deal, actor and prominent tech investor Ashton Kutcher is slated to join Soho's board, and hospitality veteran Neil Thomson has been immediately appointed as the new chief financial officer, succeeding Thomas Allen.

Origins and Expansion of Soho House

Soho House was founded in 1995 by restaurateur Nick Jones. It began above his restaurant, Cafe Boheme, on London's Greek Street, intended as a gathering place for creative individuals. Renowned for its distinctive stylish interiors and a strong sense of exclusivity, the club has since expanded its global footprint, establishing operations across Europe, North America, and Asia.

Financial Struggles and Move to Privatization

Despite experiencing growth in both membership numbers and revenue, less than three years after its public debut, Soho House found itself struggling to achieve profitability. This ongoing challenge prompted the company's board to form a special committee tasked with exploring options to take the company private, ultimately leading to the current acquisition.

Deal Structure and Investor Concerns

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The new deal structure dictates that MCR Hotels will acquire Soho's publicly traded shares, while founder Nick Jones, alongside Executive Chairman Ron Burkle and his investment firm Yucaipa, will maintain majority control of the business. This arrangement has drawn scrutiny from some investors, notably Daniel Loeb, whose hedge fund Third Point holds a substantial nearly 10% stake in Soho House.

Earlier this year, Loeb had publicly urged the company to ensure a "fair" sales process after an unnamed consortium's take-private offer emerged in late 2024. He argued that other experienced parties in the hospitality sector might be interested in the asset and controversially characterized the $9-a-share offer as a "sweetheart" deal, pointing to what he perceived as Burkle's "conflicts of interest and undue influence on the board." Collectively, Burkle's Yucaipa and founder Jones control approximately three-quarters of the company's shares. Third Point did not immediately respond to Reuters' request for comment on Monday regarding the final deal.

Financial Backing and Deal Support

The transaction is further bolstered by financial support from funds managed by affiliates of Apollo Global Management, which are providing hybrid capital financing. A recent Wall Street Journal report indicated that Apollo was expected to contribute over $700 million in both equity and debt financing to facilitate the deal.

Cover Image Credit: Financial Times