Soho House plans to list in New York with $3bn valuation

Soho House, the private members’ club group, is making plans to list in New York as early as next month in order to capitalise on investor appetite for travel and leisure stocks as the pandemic subsides.

The company intends to join the stock exchange with a valuation of as much as $3bn, despite the closure due to coronavirus restrictions of 11 of its 27 clubs across Europe, Asia and the US, say people familiar with matter.

Speculation that the target price will rise from a $2bn valuation set in a $100m funding round, led by its majority shareholder the US billionaire Ron Burkle in June last year, is based on anticipation of a boom in demand for travel stocks.

The hospitality group, which also owns 20 restaurants, 16 spas and two cinemas, declined to comment on the plans, first reported in The Times.

Shares in the hotel company Marriott are up 26 per cent since February, while Airbnb’s share price has increased more than 40 per cent since it listed in December.

Despite steep drops in revenues as a result of sites being closed, Soho House has managed to retain more than 90 per cent of its paying members during the pandemic. A typical annual membership costs £1,750.

However, Soho House’s recently filed accounts show the company stopped making interest payments on its loan in cash last year, instead choosing to use a “payment in kind” option. This allows companies with limited cash flow to pay lenders with more debt instead.

Permira Debt Managers, the credit arm of the private equity house, originally provided this £350m loan to the private members’ club in 2017, describing the debt deal as its “largest ever direct lending investment” at the time.

The private debt deal came two years after Soho House had to scrap a £200m high-yield bond sale, as investors balked at the company’s high leverage and limited free cash flow.

It is the second time Soho House has mooted a stock market flotation.

It pulled a planned New York listing in 2018, saying it did not need to raise capital as it had Permira’s backing and its owners — who include Burkle, the hospitality entrepreneur Richard Caring and Soho House founder Nick Jones — did not want to sell out.

Jones, who opened his first Soho House in 1995, told the Financial Times last year that the group did not need to consider a listing as “there is a nice lot of demand from people to invest in the company as it is”.

Over the past 26 years, Soho House has grown rapidly, becoming a hotspot for celebrity guests by targeting wealthy urbanites in the creative industries.

According to its 2019 accounts, it made £293m in revenues, 49 per cent of which came from food and drink sales and 20 per cent from members’ subscriptions with the remainder coming from its own-brand range of homewares. It reported a pre-tax loss of £77m.

During the pandemic, the group was forced to lay off 1,000 of its 8,000 employees.