Class of 2018 | suyh@wharton.upenn.edu
This past December, Apple Leisure Group agreed to a buyout led by KKR and KSL Capital Partners. Currently, Apple Leisure Group is one of Bain Capital’s portfolio companies. The nuances of the agreement have not yet been disclosed and the deal is expected to close in the first quarter of 2017.
Headquartered right outside of Philadelphia, Apple Leisure Group is the only vertically integrated travel and hospitality company in the U.S. The most notable subsidiary in the company’s portfolio is Apple Vacations, which is an industry leader in the travel agency space. Due to the company’s strong relationships with airlines and hotel companies, Apple Vacations is one of the largest tour operators boasting the highest number of excursions to Mexico and the Dominican Republic than any other competitor worldwide. Other subsidiaries of Apple Leisure Group include AMResorts, which is a collection of luxury resort destinations across Mexico and the Caribbean. The Unlimited Vacation Club by AMResorts is an exclusive travel club whose members are given guaranteed preferred rates and benefits at AMResorts properties. In addition to AMResorts, Worldstar is another notable subsidiary that is a full-service destination management company, specializing in travel products and services throughout the Hawaiian Islands. Lastly, AMSTAR, a premier destination management company, is a provider of destination services, which Apple Leisure Group is currently planning on expanding to other countries.
In 2012, Bain Capital gave Apple Leisure Group an equity infusion in order to promote growth. Following the buyout, the company underwent substantial changes. For example, the Apple Leisure Group acquired CheapCaribbean.com and vacation packager Travel Impressions in order to enhance its travel agency’s capabilities. Possibly the most significant contribution Bain Capital has made to Apple Leisure Group was promoting Founder and President of AMResorts, Alejandro Zozaya, to CEO of the hospitality powerhouse. Currently, Bain Capital is divesting its position in Apple Leisure Group and is in negotiation talks with KKR and KSL Capital Partners.
KSL Capital Partners is a private equity firm based in Denver focused exclusively to investments in the travel and leisure sectors. The company has strong portfolio companies that would complement Apple Leisure Group’s subsidiaries well. This past November, KSL acquired Outrigger Hotels and Resorts. The transaction included 37 hotels, condominiums, and resorts. Once the Apple Leisure Group deal is closed, KSL Capital Partners will be well positioned to utilize the leading hospitality company’s integrated business model to bolster its existing portfolio companies. This transaction was not the first time KSL Capital Partners teamed up with KKR. KSL Capital Partners and KRR first partnered nearly 25 years ago to acquire premier hospitality businesses. Credit Suisse and Kirkland & Ellis advised Bain Capital on the sale of Apple Leisure Group. On the other side of the negotiation table, Dentons and Thatcher & Bartlett served as advisers for KSL Capital Partners and KKR.
In the private equity space, there has been a growing allure for prominent all-inclusive resort companies. Pace Holdings, a special purpose acquisition company owned by TPG Capital, entered into a merger agreement with Playa Hotels & Resorts on December 13th. The combined firm will be a publicly listed company with an enterprise value of $1.75 billion and retain the Playa name. The company owns and operates 13 all-inclusive resorts with a total of 6,200 rooms across the Dominican Republic, Jamaica, and Mexico. Bruce Wardinski, the CEO of Playa, said that the $500 million equity infusion by TPG Capital was to finance growth.
Based on the recent transactions in the travel and leisure space, one can infer that private equity firms see large potential for value creation. Nevertheless, it is still important to ponder why Bain Capital is divesting its stake in Apple Leisure Group. It is completely plausible that Bain Capital has benefited from as much returns from the company as it possibly can, which means that there might be fairly little room for KKR and KSL Capital Partners to generate a return. Even though KSL Capital Partners may reap synergies between Apple Leisure Group and its existing portfolio companies, it is almost certain that Bain Capital will factor such benefits in Apple Leisure Group’s final purchase price.