Hyatt to acquire Apple Leisure Group for $2.7B

Hyatt Hotels Corporation has entered into a definitive agreement to acquire Apple Leisure Group (ALG), a luxury resort-management services, travel and hospitality group, from affiliates of KKR and KSL Capital Partners LLC for $2.7 billion in cash. The transaction is anticipated to close in the fourth quarter, subject to customary closing conditions.

ALG’s resort brand management platform AMResorts provides management services to the largest portfolio of luxury all-inclusive resorts in the Americas under the AMR Collection brand portfolio, including brands such as Secrets Resorts & Spa, Dreams Resorts & Spas, Breathless Resorts & Spas and Zoëtry Wellness & Spa Resorts, as well as the fast-growing Alua Hotels & Resorts brand, which is expanding in European leisure destinations. The acquisition also includes ALG’s membership offering, Unlimited Vacation Club, travel distribution business ALG Vacations, as well as destination management services and travel technology assets. Following the completion of the transaction, ALG’s business will continue to be led by current CEO Alejandro Reynal and the current leadership team. Reynal will become a member of Hyatt’s executive leadership team and report to Mark Hoplamazian, Hyatt president/CEO.

“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,” said Hoplamazian. “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.”

ALG’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 this year and has a pipeline of 24 executed deals with a large number of additional hotels in the development process. ALG’s Unlimited Vacation Club is an exclusive travel club whose participants enjoy preferred rates and other benefits at AMR Collection properties. With more than 110,000 members, Unlimited Vacation Club membership has grown at a compounded annual growth rate of 18% over the last five years.

“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,” said Reynal. “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,” said Chris Harrington and Rich Weissman, partners at KKR and KSL Capital Partners, respectively. “There is simply no better home for ALG to continue on its growth trajectory than being part of Hyatt.”

Strategic rationale 

  • Expand footprint in luxury and resort travel: The acquisition will expand Hyatt’s presence in luxury leisure travel and immediately add approximately 100 hotels and a pipeline of 24 executed deals in Europe and the Americas to its portfolio. Following completion of the transaction, Hyatt will offer the largest portfolio of luxury all-inclusive resorts in the world, will double its global resort footprint,  will be the largest operator of luxury hotels in Mexico and the Caribbean and will expand its European footprint by 60%. The acquisition will extend Hyatt’s brand footprint into 11 new European markets, greatly enhancing Hyatt’s growth potential in Europe, a critical region for global growth in leisure travel.
  • Expand platform for growth: ALG’s strong developer and owner base will expand Hyatt’s relationships with deeply committed partners in key complementary geographies. Hyatt’s global network of developers and its operational expertise is expected to further accelerate growth of ALG brands. Hyatt plans to apply the combined strength of the teams to expand beyond ALG’s current pipeline in new geographies in which ALG does not currently have hotels.
  • Benefit owners: Access to ALG’s owned distribution platforms and its extensive experience in leisure travel are expected to provide significant opportunities for Hyatt’s existing resorts. Owners of AMR Collection properties will receive increased access to a much broader collection of brands, and the backing of Hyatt’s global distribution, sales and marketing.
  • Increase choice and experiences for guests: The combined resources of ALG and Hyatt will open up expanded offerings and experiences for the benefit of the combined companies’ high-end guest and customer base. Unlimited Vacation Club will bring more than 110,000  travelers closer to Hyatt when traveling for a variety of stay occasions apart from vacations. Following completion of the transaction, Hyatt will determine ways in which World of Hyatt and Unlimited Vacation Club can bring added value and unique loyalty benefits to their member bases while benefiting hotel owners.
  • Accelerate asset-light strategy: The acquisition of ALG’s asset-light business will meaningfully 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 the asset-sale strategy was announced in 2017 at a combined multiple of over 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.

Financing 
At closing, Hyatt expects to fund more than 80% of the purchase 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 has secured a $1.7 billion financing commitment from J.P. Morgan. 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. Hyatt is committed to maintaining an investment grade profile and to continue managing the balance sheet prudently after the transaction.

Advisors 
In connection with the transaction, BDT & Company LLC and J.P. Morgan served as financial advisors to Hyatt, and Latham & Watkins LLP acted as its legal advisor. PJT Partners served as financial advisor to ALG, and Simpson Thacher & Bartlett LLP acted as its legal advisor. Deutsche Bank Securities Inc. served as financial advisor to KKR and KSL Capital Partners.

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