Billionaire Face-Off: Loeb Battles Burkle Over Soho House Deal

Activist investor Dan S. Loeb and his hedge fund Third Point have challenged billionaire Ron Burkle over the future of members-only club chain Soho House & Co. by questioning a proposed $1.7 billion take-private plan.

Third Point revealed in a filing Wednesday that it had taken a 9.9% stake in Soho House. Loeb wrote a letter to Soho House's board about his critique of the buyout, which he called a "sweetheart deal," according to Reuters and The Wall Street Journal.

Soho House and Third Point didn't respond immediately to a request for comment.

Room for Disagreement

• While both billionaires agree Soho House should go private, Loeb and Burke's clash centers on process and control and how fast the brand can profitably scale.

• Taking the company private could give Soho House breathing room to address its financial challenges without quarterly earnings pressure.

The Stakes

• For members paying $3,150+ annually, the outcome could determine whether Soho House returns to its exclusive roots or continues its expansion.

• For employees, the question is whether the private club model can maintain both profitable growth and cachet.

• The $9-per-share offer represented a 22% premium to the stock's closing price of $7.37 on Tuesday, representing a potential gain for investors.

• The buyout offer valued the company at nearly $2 billion. That was below the value at Soho House's IPO debut in 2021, when it had a market capitalization of $2.8 billion.

What's Happening

• To recap, in December, Soho House Executive Chairman Ron Burkle and his investment firm Yucaipa Companies, which have majority control of the member's club brand, said they had put together a consortium of investors to take it private.

• Loeb on Tuesday specifically called out Burkle's "obvious conflicts of interest and undue influence on the board via his super-voting share class."

• Loeb believes other hospitality sector investors might be interested in bidding. However, Soho House did signal earlier in 2024 that it was open to acquisition offers without ever announcing a deal after its board formed a committee to "evaluate certain strategic transactions, some of which may result in the Company becoming a private company."

Soho House's Trajectory

• The company, known for its upscale members clubs in mostly metropolitan areas worldwide, has never made a quarterly profit over more than two decades. 

• Built on its reputation as an exclusive hangout for the rich and famous, with its New York location gaining particular fame after being featured in the TV show "Sex and the City," the company has expanded to over 42 clubs globally.

• This rapid growth has led to concerns about overcrowding and diminishing exclusivity, especially in one short seller's report a year ago.

• Soho House has opened 27 Soho House members clubs since 2018 that “are still in the ramp-up phase,” with strong growth in newer locations like Sao Paulo, Portland, Mexico City, Rome, and Paris.

• The company has seen early success with the new premium “Mews House” concept in London’s Mayfair, with plans to expand to New York and other locations, and its The Ned brand debuts a member's club in Washington, DC, on Friday.

• The company reported “strong” first-quarter 2025 bookings, suggesting positive momentum.

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