Shares in Soho House fell sharply after a key backer in a proposed $1.8bn deal to take the members’ club group private failed to deliver a crucial funding commitment, casting doubt over the future of the transaction.
The London-founded business confirmed that Yucaipa, the investment vehicle of billionaire executive chairman Ron Burkle, had been informed that MCR Hotels would be unable to provide its planned $200m equity contribution by the expected closing date.
MCR had been a cornerstone investor in the deal announced last summer, leading a consortium that agreed to pay $9 per share to acquire the outstanding stock not already held by existing major shareholders. Its withdrawal has now put the entire transaction at risk.
Soho House shares closed down 9.6 per cent at $8.11 on Thursday, extending a long period of underperformance since the group floated on the New York Stock Exchange in 2021 at $14 a share. The stock has lost roughly 40 per cent of its value since listing.
In a regulatory filing, Soho House said Yucaipa and the board’s independent special committee were “engaging with affiliates of MCR, as well as other parties”, in an attempt to secure replacement funding. However, it cautioned that “there can be no assurance that such efforts will be successful”.
Despite the uncertainty, the group said it still intends to proceed with a scheduled shareholder vote on the merger.
The proposed take-private deal would see founder Nick Jones roll over his 6 per cent stake, alongside existing shareholders including restaurateur Richard Caring and Goldman Sachs Alternatives, which has also committed additional capital.
Other investors backing the deal include actor-turned-technology 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 including New York’s High Line Hotel and London’s BT Tower, had been expected to play a more prominent role in Soho House following the transaction. Under the original terms, its chief executive Tyler Morse was due to join the board as vice-chairman — a move now thrown into doubt.
The setback underlines the challenges facing Soho House as it looks to reshape its ownership and strategy after years of expansion that have failed to convince public market investors.
MCR declined to comment.