Soho House shares fell sharply after a key backer of a planned $1.8 billion deal to privatize its members’ club group defaulted on a crucial financing commitment, casting doubt on the deal’s future.
The London-based company confirmed that Yucaipa, the investment vehicle of billionaire CEO Ron Burkle, had been informed that MCR Hotels would not be able to deliver its planned $200 million equity contribution by its expected closing date.
MCR was one of the cornerstones of the deal announced last summer, leading a consortium that agreed to pay $9 per share to acquire the outstanding shares not already held by existing major shareholders. His withdrawal now puts the entire transaction at risk.
Soho House shares closed down 9.6 percent at $8.11 on Thursday, extending a long period of underperformance since the group went public on the New York Stock Exchange in 2021 at $14 a share. The share has lost around 40 percent of its value since it was listed on the stock exchange.
In a regulatory filing, Soho House said Yucaipa and the board’s independent special committee are “working with affiliates of MCR as well as other parties” to secure replacement funding. However, it warned that “there can be no guarantee that such efforts will be successful.”
Despite the uncertainty, the group said it still intends to hold a scheduled shareholder vote on the merger.
The proposed take-private deal would see founder Nick Jones transfer his 6 percent stake along with existing shareholders such as restaurateur Richard Caring and Goldman Sachs Alternatives, which have also provided additional capital.
Other investors backing the deal include actor-turned-tech investor Ashton Kutcher and private equity firm Apollo Global Management, which is providing a mix of equity and debt financing.
MCR, which owns high-profile assets such as New York’s High Line Hotel and London’s BT Tower, was expected to play a more prominent role in Soho House following the deal. Under the original terms, CEO Tyler Morse was supposed to join the board as executive vice chair – a move that is now in doubt.
The setback underscores the challenges Soho House faces as it seeks to reshape its ownership and strategy after years of expansion that failed to convince public market investors.
MCR declined to comment.
