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Shares in Soho House sank more than 20 per cent after the members’ club operator disclosed that a major backer of its take-private deal had pulled a $200mn funding commitment, putting the plans in jeopardy.
After decades of global expansion and a turbulent stint as a public company following a 2021 stock market listing in New York, Soho House announced in August that it was returning to private ownership in a $2.7bn deal with a group of investors led by New York-based MCR Hotels.
But Soho House disclosed in a filing on Thursday that MCR Hotels had said it was unable to fully fund its commitment to purchase $200mn of the company’s shares at $9 per share. That price was a premium on the company’s share price in August, but well shy of the $14 price tag when Soho House floated in 2021.
Soho House shares, which had jumped last year on news of the deal, sank as much as 21 per cent in early trading in New York on Thursday, before settling at about $7.50.
The members’ club operator has grown from a trendy London venue to a global empire, but some critics argue that its focus on growth has come at the expense of exclusivity and coolness, making it too easy to get a membership while service levels dipped.
At the end of 2024, the average number of members per Soho House venue was 4,700, up 30 per cent since 2021.
One investor said they were “surprised” by Thursday’s disclosure but remained optimistic that a take-private deal was the best solution to put an end to Soho House’s focus on “growth at all costs”.
MCR Hotels owns more than 25,000 guest rooms across the US, including the 1960s-themed TWA Hotel at JFK airport. When the deal with Soho House was announced in August, MCR Hotels said it planned to expand the members’ club operator by opening sites rather than adding throngs of new members to the existing houses.
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MCR chief executive Tyler Morse, who was expected to join the board of Soho House as part of the deal, said at the time that the group’s investment “represents a strategic opportunity to combine our operational expertise with one of the most distinctive brands in hospitality”.
MCR Hotels did not immediately respond to a request for comment on Thursday’s disclosure.
Other backers of the take-private deal include Apollo Global Management, the alternative asset manager, which is providing more than $800mn in debt and equity financing.
Soho House said it would proceed on Friday with a scheduled meeting of shareholders to adopt the merger agreement. The group said its backers were “engaging with affiliates of MCR, as well as other parties, to secure the funding” and pursuing “numerous options”, but warned “there can be no assurance that such efforts will be successful.”