Hyatt to Acquire Two Roads Hospitality

Date: October 2018

Location: Eight countries: USA (mainly), Oman, India, China, Indonesia, Cambodia, Puerto Rico and Mexico

Name: See below

No. of Hotels: 85

Seller: Two Roads Hospitality, an international lifestyle hotel management company with a unique collection of distinctive brands, properties and a robust development pipeline around the globe under brands such as Alila, Destination, Joie de Vivre, Thompson, Tommie, Chicago Athletic and affiliate hotels under the major brands, headed up by Jamie Sabatier, CEO.

Buyer: Hyatt Hotels Corporation announced that it has signed an agreement to acquire Two Roads Hospitality for a base price of $480 million.

Through the addition of Two Roads, its established lifestyle brands and the management agreements for the majority of its 85 properties in eight countries, Hyatt will expand its brand presence into 23 new markets while enhancing its offerings in lifestyle hotel experiences and well-being.

We are pleased to be coming together, and are dedicated to learning from each other and taking the best of both organisations forward,” said Mark Hoplamazian, president and chief executive officer, Hyatt Hotels Corporation.

Importantly, combining Two Roads’ meaningful brand presence and development plans in Asia with Hyatt’s already strong position in this region will allow us to accelerate expansion in this critically important and fast-growing part of the world.”

The acquisition consists of a base purchase price of $480 million, with the potential for Hyatt to invest up to an additional $120 million in the aggregate, contingent on the outcome of certain terms to be individually defined after closing.

The base plus contingent total purchase price is expected to reflect an EBITDA multiple of approximately 12-13x stabilised 2021 earnings, which Hyatt considers the best indicator of valuation based on anticipated synergies and growth.

Consistent with Hyatt’s long-term growth strategy to drive shareholder value, this investment in a high-growth, capital-light platform accelerates Hyatt’s evolution to a more fee-driven enterprise, funded by proceeds from an asset disposition program in which real estate has been monetized at an average multiple of approximately 16.5x EBITDA to date.

Notably, Hyatt is making this growth investment in a year in which it has committed to return approximately $800 million of shareholder capital through a combination of share repurchases and a cash dividend.

After the close of the transaction, which is expected later this year, Hyatt will create a dedicated lifestyle division as a catalyst to bring together the operations of Two Roads’ and Hyatt’s lifestyle brands.

“Hyatt is an ideal home for us as we share many values and a deep commitment to thoughtful growth and creating compelling experiences for our guests,” said Jamie Sabatier, chief executive officer, Two Roads Hospitality.

“Hyatt’s unique position in the marketplace brings with it the powerful benefit of global scale while maintaining meaningful personal relationships with team members, guests and owners.”

Hyatt will provide additional information related to the acquisition, including a preliminary estimate of 2019 earnings accretion, on its third quarter earnings call scheduled for October 31, 2018.

Goldman Sachs & Co. LLC served as exclusive financial advisor to Hyatt; Moelis & Company LLC served as exclusive financial advisor to Two Roads Hospitality; Latham & Watkins LLP served as legal counsel to Hyatt; Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to Two Roads Hospitality.

THPT Comment: Interesting move for Hyatt…adds 85 hotels in eight countries with another flurry of brand names…will they fold these into existing Hyatt brands?

Postscript: The deal closed in December 2018.

Prior to closing the transaction, the base purchase price for the acquisition was revised to $405 million from $480 million, and the aggregate potential additional consideration from Hyatt was revised to $96 million from $120 million.

As a result of the revised terms, Hyatt expects the 2019 adjusted EBITDA contribution prior to nonrecurring integration-related costs to be approximately $20 million to $25 million. This compares to a prior estimate of approximately $25 million to $30 million.

After including integration costs, the net contribution to 2019 adjusted EBITDA is expected to be flat to $5 million.

First Seen: Hotel News Now