Here is the content rewritten as an article:
Soho House and the Activist Investors: A Clash of Interest
Soho House, a global membership platform of physical and digital spaces, has been the target of activist investors, including Third Point, a multi-strategy hedge fund founded by Dan Loeb. Loeb, a pioneer of shareholder activism, has a history of taking a tough stance to maximize value for shareholders.
In a recent letter, Loeb applauded Soho House’s decision to explore a take-private transaction, but criticized the board for failing to ensure a fair sales process that maximizes value for all shareholders. He accused the board of engaging in an opaque process that resulted in a “sweetheart deal” with the company’s chairman.
Soho House, which went public in 2021, has struggled since its IPO. The company’s stock price has declined from $14 to below $5 per share, while revenue has more than doubled to $1.2 billion and earnings before interest, taxes, depreciation, and amortization (EBITDA) increased to $99 million.
In December, Soho House announced that it had received an offer from a new third-party consortium to acquire the company for about $9 per share, conditioned on certain significant shareholders rolling over their equity interests. The offer was supported by Soho House’s executive chairman Ron Burkle, who owns 46.7% of the outstanding shares and 62.3% of the voting power.
Loeb, who has a 9.89% stake in Soho House, believes that several qualified parties with significant experience in the hospitality industry would be interested in paying a superior price to the current deal. He has urged the company to launch a process that allows for a more rigorous and independent sales process.
The situation highlights poor corporate governance, as Burkle and the board seemed to think they could get the sale by the shareholders without any challenge. However, Loeb and Third Point are not likely to stand by quietly while management fails to maximize value for shareholders.
The outcome is uncertain, but one of the following three scenarios is likely to play out: Burkle will increase his offer to a value closer to the IPO price, someone else will come in with a better offer, or Third Point will commence a lawsuit against Soho House and the directors. It is expected that the board will ultimately do the right thing and make a fair offer to acquire the company if they really want it.
Dan Loeb’s approach to activism is unique, as he has generated impressive returns in credit, venture, and growth strategies in addition to his activism work. While Loeb has a reputation for being a fierce advocate for shareholders, his firm’s activism is not driven by opportunism, but rather a commitment to maximizing value for all shareholders.
