LOS ANGELES AND NEW YORK CITY — SBE Entertainment has agreed to purchase Morgans Hotel Group Co. (NASDAQ: MHGC). The deal has a reported equity value of about $82 million. Morgans is the operator of high-end hotels, including the Mondrian in Los Angeles and the Royalton in New York City.
When the transaction closes, Los Angeles-based SBE will acquire Morgans’ portfolio of 13 owned, operated or licensed hotel properties in London, Los Angeles, New York, Miami, San Francisco, Las Vegas and Istanbul, including its Hudson New York and Delano South Beach properties.
The $82 million purchase price equates to $2.25 per share in cash, according to a statement from Morgans. Under terms of the agreement, SBE will acquire all of the outstanding shares of Morgans common stock in cash, which, together with the exchange of Morgans’ Series A preferred securities, the assumption of debt and transfer of capitalized leases, represents a total enterprise value of approximately $794 million
The per share price represents a 69 percent premium over Morgans’ unaffected closing price on May 5, and a 54 percent premium to Morgans’ volume weighted average price for the 30 days up to and including May 5.
“Morgans’ board of directors carefully considered all of the alternatives available to us and we are pleased to have arrived at a transaction that we believe is in the best interests of our shareholders,” says Howard Lorber, chairman of New York-based Morgans.
The transaction is expected to close in the third or fourth quarter and is subject to regulatory approvals. Morgans hired Morgan Stanley last year to explore strategic alternatives, including a possible sale.
SBE, with brands including SLS, Hyde and Redbury hotels, says it will receive a significant investment from Cain Hoy Enterprises as part of the deal.
Sam Nazarian is the founder and CEO of SBE, and will become CEO of the combined company.
“We have long admired Morgans, its impressive history and culture of service and innovation, so we’re delighted to reach an agreement on this transaction,” says Nazarian. “Our strategic vision is to operate these amazing and unique lifestyle properties in key international gateway markets, and Morgans’ hotels, along with their talented team, fit perfectly within that vision.”
Shares of Morgans closed at $2.12 per share on Tuesday, May 10, down from $6.59 per share one year ago.
— Haisten Willis