Hyatt Hotels entered into a definitive agreement to acquire Apple Leisure Group, a luxury resort-management services, travel and hospitality group, from affiliates of KKR and KSL Capital Partners for $2.7 billion in cash. The transaction is expected to close in Q4/21, subject to customary closing conditions.
Apple Leisure Group’s resort brand management platform, AMResorts, provides management services to a portfolio of luxury resorts in the Americas under the AMRTM Collection brand portfolio. The acquisition includes Apple Leisure Group’s membership offering, Unlimited Vacation Club; its travel distribution business, ALG Vacations; and its destination management services and travel technology assets. Following the completion of the transaction, Apple Leisure Group’s business will continue to be led by current CEO Alejandro Reynal and the firm’s leadership team. Reynal will become a member of Hyatt’s executive leadership team and report to Mark Hoplamazian, president and CEO of Hyatt Hotels.
“With the asset-light acquisition of Apple Leisure Group, we are thrilled to bring a highly desirable independent resort management platform into the Hyatt family,” Hoplamazian said. “The addition of ALG’s properties will immediately double Hyatt’s global resorts footprint. ALG’s portfolio of luxury brands, leadership in the all-inclusive segment and large pipeline of new resorts will extend our reach in existing and new markets, including in Europe, and further accelerate our industry-leading net rooms growth. Importantly, the combination of this value-creating acquisition and the $2 billion increase in our asset sale commitment will transform our earnings profile, and we expect Hyatt to reach 80% fee-based earnings by the end of 2024.”
Apple Leisure Group’s hotel portfolio consists of more than 33,000 rooms operating in 10 countries. The portfolio has grown from nine resorts in 2007 to approximately 100 properties by the end of 2021 and has a pipeline of 24 executed deals with additional hotels in the development process.
“Combining Hyatt’s deep expertise and global brand footprint with ALG’s strong resort brands, operating capabilities and robust development plans will elevate our differentiated position and create a leader in luxury leisure travel,” Reynal said. “On behalf of everyone at ALG, I am grateful to our partners at KKR and KSL who supported us in building the platform into what it is today. I am excited to have our team join the Hyatt family and I anticipate a robust growth journey ahead as the industry expands and we are able to provide a best-in-class leisure offering to an even larger group of travelers around the world.”
“Today is a great milestone in what has been a story of growth, resilience and dedication to world-class leisure experiences by an outstanding team at Apple Leisure Group,” Chris Harrington and Rich Weissman, partners at KKR and KSL Capital Partners, said in a joint statement. “There is simply no better home for ALG to continue on its growth trajectory than being part of Hyatt.”
The acquisition of Apple Leisure Group will increase the percentage of revenues and earnings Hyatt will generate from fees. Additionally, Hyatt anticipates fulfilling its current commitment to sell $1.5 billion of hotel real estate in 2021, resulting in a total of more than $3 billion of proceeds realized since it began its asset-sale strategy in 2017 at a combined multiple of more than 17x EBITDA as compared to Hyatt’s original estimate of 13x to 15x. Hyatt is further committing to an additional $2 billion in proceeds from the sale of hotel real estate by the end of 2024.
At closing, Hyatt expects to fund more than 80% of the purchase of Apple Leisure Group with a combination of $1 billion of cash on hand and new debt financings, and the remainder with approximately $500 million from equity financing. Hyatt secured a $1.7 billion financing commitment from J.P. Morgan to help support the acquisition. Cash proceeds from the $2 billion asset sale program are expected to be used to pay down debt, including debt incurred to fund the acquisition. H
In connection with the transaction, BDT & Company and J.P. Morgan served as financial advisors to Hyatt, and Latham & Watkins acted as its legal advisor. PJT Partners served as financial advisor to Apple Leisure Group, and Simpson Thacher & Bartlett acted as its legal advisor. Deutsche Bank Securities served as financial advisor to KKR and KSL Capital Partners.