Playa Hotels and Resorts (NASDAQ:PLYA) stock has been on the move in recent weeks, spurred on by a series of moves that have generated investor interest.
A leader in all-inclusive beachfront resorts in the Caribbean, Playa Hotels stock has climbed roughly 31% since Christmas week to around $12.50 per share. The surge has led to a 45% return over the past 12 months.
There have been some clear catalysts that have lifted Playa Hotels stock in recent weeks, including a potential merger.
Potential sale to Hyatt?
Playa’s stock soared after the December 23rd news that it signed an exclusivity agreement with Hyatt Hotels (NYSE: H) to explore potential strategic options.
The company said that one of those strategic options includes the acquisition of the Playa by Hyatt. The exclusivity agreement ends on February 3m about a month from now. So, investors could hear something in the coming weeks. It is part of the board’s effort to maximize 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,” Bruce Wardinski, chairman and CEO of Playa Hotels & Resorts, said. “Hyatt’s interest in our company is a testament to the strength of our business and the dedication of our incredible Playa team. The Playa board and management team will remain open-minded and continue to act in the best interests of all Playa shareholders.”
This does not necessarily mean that Playa will be sold to Hyatt. It could also potentially lead to some type of strategic agreement — or nothing at all.
Playa and Hyatt are already partners, as Hyatt owns 9.99% of Playa Hotel stock and has a branding agreement with Playa on the Hyatt Zilara and Hyatt Ziva properties.
“Playa has been a valuable partner for many years, is one of the world’s strongest operators of all-inclusive resorts, and owns a premier portfolio of high-quality, high-end all-inclusive resorts in iconic locations and key markets across the Caribbean and Mexico,” Mark Hoplamazian, president and CEO of Hyatt, said. “Strategic alternatives under consideration could have compelling strategic merit to add new incremental durable fee streams for Hyatt. We remain steadfastly committed to our asset-light business model and if this process continues, we will continue to map out a clear path for an asset-light outcome for any strategic alternatives we undertake.”
Selling off Jewel Paradise Cove
Truist maintained a “buy” rating and raised its price target to $13 per share after the exclusivity agreement was announced. Truist analyst Patrick Scholes sees a “greater likelihood than not” that the deal with Hyatt will get done, reported The Fly.
More evidence that Playa may be prepping for a sale is the news on December 31 that Playa is selling its Jewel Paradise Cove resort in Jamaica. The company has sold two other Jewel properties in recent years, and this past fall, Paradise Cove workers protested, seeking better wages and benefits.
The sale of this property, for $28.5 million, would likely improve Playa’s financials. The transaction should close in the first quarter.
Hyatt stock gained a bit on the news but got nowhere near the bump that Playa got. Playa had a rough third quarter due to hurricane season. But through the first three quarters, its net income is up 22% year over year. Further, its net revenue per available room is up 7% to $334 and its occupancy rate has risen 1.8 basis points to 73.5%.
However, its cash position dropped to $211 million, from $272 million at the start of the year. Further, its long-term debt increased to $1.08 billion, from $1.06 billion.
Investors interested in Playa Hotels stock should look for news on this potential merger in the coming weeks.
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