Hyatt to Acquire Apple Leisure Group for $2.7B

Global hospitality firm Hyatt Hotels Corp. (H) has signed an agreement to acquire travel and hospitality conglomerate Apple Leisure Group (ALG) for $2.7 billion in cash. Hyatt will acquire ALG from the affiliates of KSL Capital Partners and KKR & Co. (KKR).

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Headquartered in Chicago, Hyatt owns 20 premier brands, including Park Hyatt, Hyatt Regency, Hyatt, Hyatt House and The Unbound Collection by Hyatt, among others. Its portfolio consists of more than 1,000 properties and hotels across 68 countries.

Pennsylvania-based ALG has a resort brand management platform called AMResorts that offers management services under the AMR Collection brand portfolio. It has more than 33,000 rooms in 10 nations. (See Hyatt stock chart on TipRanks)

The acquisition, which is expected to be completed in the fourth quarter of 2021, will include ALG Vacations travel distribution business, Unlimited Vacation Club membership offering and ALG’s travel technology assets and destination management services.

ALG CEO Alejandro Reynal as well as the current ALG leadership team will continue to lead ALG’s business after the completion of the acquisition. Furthermore, Reynal will join Hyatt’s executive leadership team, and report to Mark Hoplamazian, the CEO and President of Hyatt.

Hoplamazian said, “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.”

Hyatt plans to fund 20% of the deal from equity financing and the remaining 80% with new debt financings and cash in hand.

On August 4, Deutsche Bank analyst Carlo Santarelli maintained a Hold rating on the stock with a price target of $80 (10.9% upside potential). The analyst expects the company to report a loss of $2.99 per share in the third quarter.

Overall, the stock has a Hold consensus based on 1 Buy, 5 Holds and 2 Sells. The average Hyatt Hotels price target of $79.88 implies 10.7% upside potential. The company’s shares have gained 31.9% over the past year.

According to TipRanks’ Smart Score rating system, Hyatt scores a 4 out of 10, suggesting that the stock is likely to perform in line with market averages.