8-K: Jaws Mustang Acquisition Corp. Announces Letter of Intent for Business Combination with Starwood Capital Entities

Jaws Mustang Acquisition Corporation has signed a non-binding letter of intent with Starwood Capital Entities for a potential business combination that would create a publicly-listed hospitality company.

Summary

• Jaws Mustang Acquisition Corporation (Jaws) and investment entities affiliated with Starwood Capital Group (Starwood Capital Entities) have announced a non-binding letter of intent (LOI) for a potential business combination.
• The Starwood Capital Entities own a portfolio of hotels including 1 Hotels properties in Manhattan and Brooklyn, and the De Vere Portfolio in the United Kingdom.
• The combined public company would be listed on a national securities exchange after the business combination.
• The initial portfolio of hotels generated an estimated $52 million in Net Operating Income (NOI) in 2023 and is projected to generate $62 million in NOI for 2024.
• The 1 Hotels properties will continue to be managed by SH Group Hotels & Residences U.S., LLC, and the De Vere Portfolio will continue to be managed by its internal operational team.
• Jaws expects to announce additional details regarding the proposed business combination upon the execution of a definitive merger agreement in the coming weeks.
• The completion of the business combination is subject to various conditions, including the negotiation of a definitive agreement, securing investor and third-party consents, regulatory review, and approval by Jaws' board of directors and shareholders.

Sentiment

Score: 7

Explanation: The document is generally positive, highlighting the potential for a successful business combination and the strong performance of the initial hotel portfolio. However, it also includes cautionary language about the non-binding nature of the LOI and the risks involved.

Positives

• The potential business combination would create a publicly-listed hospitality company with a portfolio of well-known hotel brands.
• The initial portfolio of hotels has a strong track record of generating Net Operating Income (NOI), with $52 million in 2023 and a projected $62 million in 2024.
• The 1 Hotels brand is known for its focus on environmental sustainability and luxury guest experience.
• The De Vere Portfolio consists of historic and iconic country estates and houses with a long tradition of hospitality.
• The combined company is expected to seek additional hotel acquisitions, including 1 Hotel properties, indicating potential for future growth.

Negatives

• The letter of intent is non-binding, and there is no assurance that a definitive agreement will be reached or that the transaction will be completed.
• The completion of the business combination is subject to various conditions and contingencies, including securing investor and third-party consents, regulatory review, and approval by Jaws' board of directors and shareholders.
• The financial projections are based on estimates and assumptions that are subject to significant uncertainties and contingencies.

Risks

• There is no guarantee that a definitive agreement will be reached or that the proposed transaction will be consummated.
• The business combination is subject to various conditions, including regulatory approvals and shareholder consent.
• The financial projections are based on estimates and assumptions that may not materialize.
• The combined company's future performance is subject to various risks and uncertainties, including market conditions and competition.
• The document includes forward-looking statements that are not guarantees of future performance and involve risks and uncertainties.

Future Outlook

The combined public company is expected to seek to acquire additional hotel properties, including 1 Hotel properties, on an ongoing basis. The Starwood Capital Entities and Jaws intend to finalize their definitive business combination agreement in the coming weeks.

Management Comments

• Barry Sternlicht, Chairman and CEO of Starwood Capital Group, stated 'I wanted to capture the beauty of nature in a hotel and commit to safeguarding it as best I can, a responsibility that I believe we all share. Its 1 world. But 1 is more than a hotel, its a philosophy and a platform for change.'

Industry Context

This announcement reflects a trend of special purpose acquisition companies (SPACs) merging with private companies to bring them to the public market. The hospitality industry is currently experiencing a period of recovery and growth, making this a potentially opportune time for such a transaction.

Comparison to Industry Standards

• The projected NOI of $62 million for 2024 is a key metric, but without details on the capital structure and valuation, it's difficult to compare to industry standards.
• Comparable companies in the luxury hotel space include publicly listed hotel REITs such as Host Hotels & Resorts (HST) and Park Hotels & Resorts (PK), which have significantly larger portfolios and market capitalizations.
• The 1 Hotels brand is positioned as a luxury, eco-conscious brand, which differentiates it from more traditional hotel chains.
• The De Vere Portfolio's focus on historic country estates provides a unique offering compared to standard hotel properties.

Stakeholder Impact

• Shareholders of Jaws will have the opportunity to vote on the proposed business combination.
• Employees of the 1 Hotels and De Vere Portfolio may experience changes as a result of the merger.
• Customers of the hotels may see changes in the brand and service offerings.
• Suppliers and creditors of the hotels may be impacted by the new ownership structure.

Next Steps

• Jaws and Starwood Capital Entities intend to finalize their definitive business combination agreement in the coming weeks.
• Jaws intends to file a registration statement on Form S-4 with the SEC, which will include a preliminary proxy statement/prospectus.
• The definitive proxy statement will be mailed to shareholders of Jaws for voting on the potential business combination.

Key Dates

Keywords

business combination, hospitality, merger, acquisition, Starwood Capital, Jaws Mustang, 1 Hotels, De Vere Portfolio, Net Operating Income, SPAC