Ultimate Escapes Merger With Another Club Option Overview

By: Destination Club News
Date: September 12, 2010

Mergers within the destination club industry have become commonplace over the years, drastically reshaping the landscape of the sector. The Abercrombie & Kent Residence Club was formed by merging equity clubs BelleHavens and Crescendo Residences. Solstice Collection and Parallel announced a merger of equals at the ultra-luxury level of the market years ago. Ultimate Escapes acquired or merged with three different clubs, Tanner & Haley, Ventures Equity, and Private Escapes alone, and nearly added High Country Club as they fell into disarray.

After defaulting on a loan agreement with lender CapitalSource, Ultimate Escapes is now the one looking to merge with another club or hospitality firm. In a webcast available to members on Thursday, Ultimate Escapes President and CEO Jim Tousignant described five potential options available to the club and its members, including such a situation where Ultimate Escapes would merge with another firm, the third alternative discussed by the club.

"When we look at alternative number three, this alternative represents the merger of Ultimate Escapes with another club or hospitality firm," said Tousignant. "The company has been in active negotiations for more than six months to merge with another club or hospitality entity and the company is still engaged in those discussions with this particular potential merger partner. Due diligence has already been completed, but there can be no assurance that any deal will be finalized or closed with this potential merger partner. The company and our advisors, including CRG, are also in initial discussions with other potential merger partners, but the company needs to make rapid progress for any of these alternative discussions to lead to a merger quickly."

While this outcome could be beneficial to members, the timetable that Ultimate Escapes is currently working under makes this option seem rather unlikely. According to Tousignant, the club may be forced to file for bankruptcy as early as Monday. Using Ultimate Escapes alone as a marker, when the company, then known as Ultimate Resort, announced the acquisition of Tanner & Haley in November of 2006, it was not completed until May of 2007. In September of 2007, Ultimate Resort and Private Escapes announced that they signed a $200 million merger agreement that would create Ultimate Escapes, but it wasn't until September of 2009 that the deal was actually finalized. According to the club, even in a bankruptcy proceeding, as little as 30 days could be given to complete such a transaction.

While still actively pursuing a merger, Ultimate Escapes is focused primarily on becoming a member-owned club. In this option, club members would pay a one-time conversion fee of between $15,000 and $50,000. Feel free to read a more thorough analysis of this option and our thoughts here. In addition to the member-owned conversion and merger ideas, three other options are also on the floor that we invite you to learn more about.

• Permanent annual dues increase
• Sale of the club
• File for bankruptcy

Despite the efforts at Ultimate Escapes, CapitalSource is currently holding all the cards. We will continue to watch the situation and let you know more about any potential merger happenings as we learn about them.