Soho House Shares Up 15%: What Is Driving Today’s Move?

Soho House's stock (NYSE: SHCO) is trading up 15% this morning at $8.84, as news that the company is poised to be taken private by a consortium led by MCR Hotels in a deal valuing the company at approximately $1.8 billion, or $9 per share boosts the name.

Following the news, Soho House's stock experienced a notable upswing towards the acquisition price.

The deal, expected to be finalized imminently, includes financing exceeding $800 million from Apollo Global Management. Significantly, Ron Burkle, Soho House's controlling shareholder, is expected to roll over his stake, indicating confidence in the future of the company under private ownership. Several other existing shareholders are also anticipated to maintain their investments.

The move to go private follows a period of scrutiny regarding Soho House's profitability and expansion strategy as a publicly listed entity. Despite recent challenges, the company has reported three consecutive profitable quarters, suggesting an underlying improvement in its financial performance. The decision also comes after pressure from activist investor Dan Loeb's Third Point hedge fund, which publicly criticized the company's underperformance and advocated for a higher valuation.

Soho House, known for its exclusive members' clubs worldwide, has faced difficulties translating its brand strength into consistent public market success. By transitioning to private ownership, the company aims to address these challenges and potentially streamline its operations away from the glare of quarterly earnings reports. The deal structure, with key existing shareholders retaining their stakes, suggests a long-term vision for the company's growth.

Analysts will be closely watching the integration of Soho House within MCR Hotels' portfolio and the strategic direction taken under private ownership. The markets will be keen to see whether the change will allow Soho House to unlock further value and solidify its position as a leading global members' club. The company's recent stock performance underscores the market's anticipation of this transition.