Hyatt Hotels (H 75.03, -0.62, -0.82%) is on pace to extend
its recent losing streak to seven sessions after announcing a deal to acquire
privately-held Two Roads Hospitality and news that Chief Financial Officer
Patrick Grismer will be stepping down.
As to the Two Roads Hospitality deal, Hyatt announced an agreement to acquire the privately-held hotel management company this morning; Two Roads owns 85 properties in eight countries. Each of Two Roads’ brands will join Hyatt’s portfolio.
Two Roads was previously owned by Geolo Capital, the private equity investment arm of the John A. Pritzker family office. Geolo made its first hotel purchase in 2009 with the acquisition of Carmel Valley Ranch and subsequently rapidly grew its portfolio of owned properties and also created Two Roads Hospitality together with Lowe Hospitality Group. Geolo will no longer be a principal shareholder of Two Roads Hospitality, but it will remain the largest owner of hotels managed by Hyatt.
Per the terms of the deal, the acquisition consists of a base purchase price of $480 mln, with the potential for Hyatt to invest up to an additional $120 mln in the aggregate, contingent on the outcome of certain terms. The total purchase price is expected to reflect an EBITDA multiple of around 12-13x stabilized 2021 earnings, which Hyatt considers the best indicator of valuation based on anticipated synergies and growth.
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 about 16.5x EBITDA to date. Notably, Hyatt is making this growth investment in a year in which it has committed to return about $800 mln of shareholder capital through a combination of share repurchases and a cash dividend. Hyatt sees this investment as consistent with its long-term growth strategy pursued in the interest of elevating shareholder value.
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 plans to integrate Two Roads brands into the World of Hyatt program in 2019.
This morning Hyatt also announced that Patrick Grismer has resigned as CFO, effective November 2, 2018, in order to assume the CFO position at Starbucks (SBUX 56.15, +0.39, +0.70%). Upon his departure, Grismer will be succeeded by Joan Bottarini, who has been with Hyatt since 1999 and currently serves as SVP of finance for the Americas at Hyatt. Grismer had occupied the CFO position since joining Hyatt in March 2016.
In the press release announcing Mr. Grismer’s departure Hyatt also reaffirmed its full-year 2018 outlook provided on October 1, 2018. Hyatt plans to release Q3 results on October 30 after the market closes, with a supplementary conference call scheduled for the following morning.
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