Hotel chain Global Hyatt Corp. said on Thursday that private investment firm Madrone Capital Partners and entities affiliated with Goldman Sachs Capital Partners have agreed to acquire a minority stake in Global Hyatt for a total investment of $1 billion. Global Hyatt will also expand its Board to include representatives from both the investment groups. Specific details of the structure of the transaction were not revealed.
Goldman Sachs Capital Partners is the private-equity arm of investment and financial services company Goldman Sachs Group Inc. (GS). Since 1986, Goldman Sachs has raised thirteen private equity and investment funds aggregating $56 billion of capital commitments.
Madrone Capital, based in Menlo Park, California, is affiliated with Rob Walton and his family. The family, which owns assets worth $100 billion, holds 40% stake in Wal-Mart Stores, Inc. (WMT) and interests in Arvest Banking Group and newspaper chain Community Publishers Inc. The Walton family's investment in Global Hyatt is the largest investment to date by the firm.
According to Tom Pritzker, Chairman of Global Hyatt, the $1 billion investment will be used mainly to provide liquidity to the Pritzker family that owns the hotel group. Global Hyatt currently operates over 735 hotels and resorts in 44 countries. The company's affiliates operates Hyatt branded hotels and resorts under the Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt Resorts, Hyatt, Hyatt Place and Hyatt Summerfield Suites brands.
Global Hyatt has more than 65 hotels in its service pipeline opening over the next three years, including 16 in China. Two Andaz brand properties under the company's new full-service concept in casual luxury are scheduled for New York and one for London. The company also has ten new Hyatt Summerfield Suites across the U.S. including which the group will operate 30 Hyatt Summerfield Suites hotels by the end of 2007. In addition, the company's nationwide portfolio of Hyatt Place hotels will reach 120 by 2007-end, with 50 projects under development.
Global Hyatt recently announced a number of changes including a re-alignment of its organizational structure and the strengthening the company's senior management team. As part of this plan, the hotel group last year appointed Mark Hoplamazian, a longtime Pritzker executive, as its chief executive officer. The company also appointed new heads for its Real Estate and Development and Human Resources and entered into the select service segment with the launch of Hyatt Place and Hyatt Summerfield Suites.
"As part of our strategic planning we considered opening up our shareholder base to an investor or investors who shared our vision and could facilitate the implementation of the company's strategy. As we considered the criteria we would use, Rob Walton's family interests and Goldman Sachs emerged as possessing the key attributes we sought: global awareness and presence, world-class reputation, long-term perspective and an ability to add value through ongoing engagement with the Board and management of the company," Pritzker stated.
Greg Penner, a general partner of Madrone Capital Partners, and Byron Trott, a vice chairman of Investment Banking, Goldman Sachs, will join Global Hyatt's Board. Pritzker believes the addition of these investors will boost the company's restructuring efforts without affecting its financial capacity.
Prior to forming Madrone Capital two years ago, Penner, a son-in-law of Walton, was a senior vice president at Wal-Mart. He also served as a general partner of Peninsula Capital and a financial analyst at Goldman Sachs. Penner is a director of Baidu.com, 99Bill Corporation, and The Seiyu, Ltd.
Trott is also serving as head of Goldman Sachs' Chicago office and the Midwest region. He is a member of the Investment Committee of the firm's Principal Investment Area and Investment Banking division's Operating Committee.
While commenting on the transaction, Walton said, "Global Hyatt has all of the ingredients necessary for long-term growth: a capable and dedicated group of associates, solid capital base, well-respected brands and a global footprint including a strong presence in the highest growth areas in the world."
"As Global Hyatt continues to take advantage of the growth of travel in new geographies while building on our strong brand reputation, we welcome the breadth of experience that our new partners bring to the organization," said Hoplamazian.
GS closed Wednesday's trade at $173.72, up $2.77, on a volume of 12.79 million shares.
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