Hyatt Hotels is currently engaged in exclusive negotiations that could lead to the acquisition of Playa Hotels & Resorts, as well as exploring other options for the operator of resorts located in desirable destinations such as Mexico, Jamaica, and the Dominican Republic. This significant move was announced by both companies on Monday, drawing attention from industry experts and investors alike. The exclusivity agreement between Hyatt and Playa is set to expire at the end of February 3.
Notably, Hyatt already holds a minority stake of 9.99% in Playa, showcasing a pre-existing relationship between the two entities. In a formal statement, Playa’s Chief Executive Bruce Wardinski affirmed the board and management’s commitment to exploring strategic options that would enhance shareholder value.
"Our board and management team regularly review our structure, strategy and opportunities to enhance shareholder value, and we are pleased to enter into exclusive discussions with Hyatt regarding potential strategic options," he stated. This announcement reflects Playa's ongoing commitment to act in the best interests of all its shareholders. It is essential to note that while both companies have begun discussions, there is still no certainty that a deal will materialize.
Following the announcement, Hyatt’s stock experienced a decline of 2.1%, whereas Playa saw a substantial surge in its Nasdaq-listed shares, jumping by 29%. Hyatt’s CEO Mark Hoplamazian elaborated on the strategic significance of this potential acquisition, indicating that, "Strategic alternatives under consideration could have compelling strategic merit to add new incremental durable fee streams for Hyatt." He emphasized Hyat's unwavering dedication to an asset-light business model, noting, "If this process continues, we will continue to map out a clear path for an asset-light outcome for any strategic alternatives we undertake." Recent insights from Truist Securities suggest that a transaction between Hyatt and Playa is more likely than not.
The report highlights Playa's inclination towards a potential sale, as management believes the company’s shares are undervalued in the public market. This context makes Hyatt’s interest somewhat unexpected, particularly given the company’s historical focus on divesting hotels rather than acquiring them. Should the deal go through, industry analysts speculate that Hyatt could rebrand the all-inclusive hotels it does not already own, potentially divesting the real estate involved.
Truist speculates on the future of the real estate with comments suggesting, "We speculate the real estate could be sold-off over time or possibly via a pre-arranged sale concurrent with the possible acquisition of Playa." In the latest financial results, Playa has reported a break-even in third-quarter adjusted earnings per share compared to a loss of $0.06 in the prior year.
The company’s total revenue has also declined, totaling $183.5 million, down from $213.1 million. On the other hand, Hyatt recently disclosed its adjusted EPS of $0.94 for the September quarter, marking a year-on-year increase from $0.74, with revenues climbing to $1.63 billion from $1.62 billion.
As these two hospitality giants explore this potential partnership, the market watches closely for what could become a defining moment in the hospitality sector. Price: 157.16, Change: -2.69, Percent Change: -1.68.