US hotel operator Hyatt Hotels Corp announced its intention to buy Apple Leisure Group from private-equity owner KKR & Co and KSL Capital Partners for $2.7 billion. After the completion of the agreement, Hyatt expects to double its global resort footprint. More than 80% of the purchase will be funded by a combination of $1 billion of cash in hand and new debt financings, while the rest of $500 million will be from equity financing. Hyatt secured a $1.7 billion financing commitment from JP Morgan.
The cash proceeds from the $2 billion asset sale program are expected to be used to pay down debt, including the one used to fund the acquisition.
KKR and KSL first purchased Apple Leisure Corp from Bain Capital for an undisclosed price in 2017.
According to Hyatt’s statement, the acquisition will increase the percentage of revenues and earnings from fees. The hotel operator is looking to fulfil the current commitment of selling $1.5 billion of hotel real estate in 2021. Moreover, Hyatt is committing to an additional $2 billion in proceeds from the sale of hotel real estate by the end of 2024.
The transaction seems to be the latest sign of optimism regarding returning to vacation travel, even if the US economy is still struggling with the COVID-19 pandemic. Apple Leisure’s business got hit by virus-related lockdowns and travel bans, but it managed to rebound as restrictions eased.
Sources: marketwatch.com, wsj.com