How much deferred consideration is The Standardx obligated to pay in the Bahia Principe Transaction?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
ahia Principe Transaction (see Note 4) for €419 million of base consideration, subject to customary adjustments related to working capital, cash, and indebtedness, and including €60 million of deferred consideration payable at future dates. We may pay additional variable contingent consideration through 2034 primarily related to the achievement of certain milestones for the development of additional hotels to be managed by the joint venture. The contingent consideration is payable at each hotel opening and is based on a multiple of stabilized base and incentive management fee revenues, and therefore, we are unable to reasonably estimate our maximum potential future consideration.
We closed on the transaction on December 27, 2024, paid cash of €359 million (approximately $374 million) and accounted for the transaction as a business combination as we are the primary beneficiary of the VIE (see Note 4). Upon acquisition, we recorded a $58 million deferred consideration liability at fair value, of which $20 million is recorded in accrued expenses and other current liabilities and $38 million is recorded in other long-term liabilities on our consolidated balance sheet. The fair value was estimated using a discounted future cash flow model and includes assumptions and judgments regarding the discount rate, which is primarily a Level Three assumption. We also recorded a $33 million contingent consideration liability at fair value in other long-term liabilities on our consolidated balance sheet. The fair value was estimated using a discounted future cash flow model and includes assumptions and judgments regarding the discount rate, estimated probability of achieving the hotel development milestones, and expected amount and timing of payments, which are primarily Level Three assumptions. Total purchase consideration was determined as follows:
| Management and hotel services agreement and franchise agreement intangib
Source: Item 23 — Receipts (FDD pages 85–132)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the company's acquisition of Bahia Principe involved a base consideration of €419 million, which included €60 million of deferred consideration payable at future dates. This deferred consideration is subject to customary adjustments related to working capital, cash, and indebtedness.
Additionally, The Standardx may be required to pay variable contingent consideration through 2034, contingent upon the achievement of certain milestones related to the development of additional hotels managed by the joint venture. These payments are structured as a multiple of stabilized base and incentive management fee revenues, making it difficult to reasonably estimate the maximum potential future consideration.
Upon acquiring Bahia Principe, The Standardx recorded a $58 million deferred consideration liability at fair value, allocating $20 million to accrued expenses and other current liabilities, and $38 million to other long-term liabilities on their consolidated balance sheet. Furthermore, a $33 million contingent consideration liability was recorded at fair value in other long-term liabilities. These fair values were estimated using a discounted future cash flow model, incorporating assumptions and judgments regarding the discount rate and other factors.