Actor Ashton Kutcher starred in films like No Strings Attached (2011), Dude, Where's My Car? (2000), and What Happens in Vegas (2008), but now he's set to be the star of a corporate boardroom.
Kutcher is leading a consortium of investors who are part of a $2.7 billion deal to take high-end membership club Soho House (SHCO 14.92%) private. As part of the deal, Kutcher will take a seat on Soho House's board.
Here's what investors need to know.
Image source: Getty Images.
Some strings attached
Soho House shareholders will receive $9 in cash per share when the deal closes. That represents an 83% premium over the pre-offer share price of $4.91 a share. The stock hasn't traded at that level since June 2022, although it's lower than the company's initial public offering (IPO) price of $14 per share from July 2021. It also represents a significant upside to the stock's Friday close of $7.64 a share.
So, besides Ashton Kutcher, who are the buyers?
Kutcher's consortium is partnering with MCR, the third-largest owner-operator of hotels in the U.S. While the bulk of MCR's portfolio consists of branded mid-priced hotels like Homewood Suites and Residence Inn, in recent years it has begun purchasing higher-end properties. In 2015, it bought the iconic Eero Saarinen-designed TWA hotel at JFK Airport and in 2023 it purchased the historic Gramercy Park Hotel in New York City. Soho House, a membership club offering exclusive access to a global portfolio of high-end vacation properties, spas, and coworking spaces, will further expand its high-end portfolio.
As part of the deal, MCR's chairman and CEO, Tyler Morse, will take a seat on Soho House's board, along with Kutcher. The company is also getting a new CFO, Neil Thomson, who has spent 30 years in the hospitality industry.
Dude, where's my update?
The announcement took Wall Street by surprise, since it had been more than six months since the company had provided any new information about its potential privatization.
On Dec. 19 of last year, Soho House announced it had received an offer from an unidentified "third-party consortium" to take the company private. That announcement caused the share price to immediately jump 47%, from $4.91 to $7.22. In its 2024 earnings release, Soho House included a "transaction update," that read, in part, "The Company set up a Special Committee to assess the offer and the parties continue to assess the offer and a potential transaction, however no assurances can be given that the Special Committee's assessment will result in any change in strategy, or if a transaction will be undertaken."
Investors hoping for additional details were disappointed: Soho House's Q1 earnings release on May 9 and its Q2 earnings release on Aug. 8 just gave that same "transaction update," reprinted verbatim.
Then, on Aug. 18, just 10 days after its Q2 earnings report, Soho House surprised everyone by announcing that it had signed a definitive agreement with the investor group that includes Kutcher and MCR.
What happens in arbitrage
So, is there any way for investors to cash in on this deal?
If you're not already a Soho House shareholder, the upside is pretty limited. Shares are currently trading at about $8.80, just 2% below the offer price, indicating the market believes there's a high likelihood of the transaction succeeding (which is unsurprising, since the company name-checked several major shareholders as being on board). A 2% upside isn't much, especially considering you'd have to wait until the deal closes to cash in.
If you are a Soho House shareholder, it may make sense for you -- depending on your investment goals and financial situation -- to sell your shares now. The alternative is to wait until the deal closes in exchange for a few measly percentage points of arbitrage, but you may earn more by putting that money into more promising investments now.
Investors who missed the boat on Soho House may want to consider other beaten-down online property platforms like Airbnb or Marriott Vacations Worldwide, both of which are down more than 40% from their five-year highs.
