Posh Soho House Gets Premium Buyout Offer as It Balances Prestige with Scaling Up

It’s not a news exclusive, it’s exclusive news: One of the world’s best known private members’ clubs could soon be leaving publicly-traded markets.

Soho House — the international club that counts A-list stars and financiers among its ranks and which has rejected CEOs seen as not cool enough — announced Thursday that it’s considering a buyout offer from a third-party consortium. The offer would put an 83% premium on Soho’s Wednesday closing price and comes a year after it had to close off admissions in three cities over concerns it was no longer exclusive enough.

Appeal or No Appeal

Founded in 1995 in London, where it has several locations, and with more than three dozen “houses” across the world in power cities including New York, LA, Miami, Paris, Berlin, and Hong Kong, Soho House forged its white-hot appeal on a less traditional criteria that set it apart from the private members clubs of old. This was one you couldn’t merely buy your way into, with a loosely defined judgement of “creativity” placed on applicants.

Care was even taken to cull some financial elites who weren’t cool enough for the vibe: Soho’s former membership director told The Hollywood Reporter in 2015 that 400 members were purged after complaints that too many Wall Street suits had infiltrated the New York outpost. That bravado made membership all the more desirable among those with status and those seeking it — Prince Harry and Meghan Markle met at one of the London locations, for example.

Going public meant greater pressure to scale up the business, which led to both its appeal as a takeover target and its struggles to maintain its exclusive reputation:

• On Thursday, Soho House said its membership grew 4.8% year-over-year to 267,494 in the quarter ending September 29, as revenues rose 13.6% to $333 million in the same period. Revenues from memberships alone rose 17% YoY to $107 million.
• But earlier this year, Soho House suspended new admissions in London, New York and Los Angeles after members complained the place was getting too popular — the phenomenon was perhaps best exemplified by a wildly popular Instagram meme account that harps on overcrowding and increasing fees, while throwing in some shade at poseur non-members still waiting to get in. That’s the price of trying to grow a business whose cachet is somewhat antithetical to growth.

The Offer They May or May Not Refuse: The third party offer requires executive chair Ron Burkle and his private equity firm Yucaipa to hand over their equity — he supports the deal — and values Soho House at $1.7 billion. Shares in Soho House rocketed 52% Thursday, suggesting enthusiasm for the offer.