Hospitality company SBE will acquire Morgans Hotel Group for $794 million in a deal that the two companies agreed on yesterday. SBE will pay $2.25 per share for all outstanding shares of Morgans common stock. Combined with the exchange of preferred securities, assumption of debt and transfer of capitalized leases, the total enterprise value of the deal is $794 million. The stock price represents a 69 percent premium over Morgans' closing price on May 5. SBE manages and operates a variety of hotels, residences, restaurants and nightlife venues, including the SLS hotel brand.
At closing, SBE will acquire the Morgans portfolio of owned, operated or licensed hotels in London, Los Angeles, Miami, San Francisco, Las Vegas and Istanbul, Turkey. Those properties represent the Delano, Hudson and Mondrian brands. SBE additionally is working toward assuming the mortgages of the Hudson New York and Delano South Beach properties, which total about $422 million and would occur at the time of closing.
"Morgans' board of directors carefully considered all of the alternatives available to us," said Morgans chairman Howard M. Lorber, "and we are pleased to have arrived at a transaction that we believe is in the best interests of our shareholders, while providing a great home for our attractive assets under a renowned hospitality company in SBE."
Morgans Hotel Group had been looking for suitors for some time. SBE first attempted to acquire the company last year, although the deal fell through due to clashing stakeholder interests. Representatives of then Morgans stakeholder Rambleside Holdings, a real-estate investment firm, made waves
when they sent an open letter to Morgans executives, calling last year's potential SBE merger "a deleterious agreement that will materially undervalue our company and key real estate assets, while handing control over to a sub-scale, reputationally challenged hospitality operator."
Morgans Board of Directors has approved the latest deal, however, and expects it to close in the third or fourth quarter, subject to regulatory approvals, mortgage-agreement refinancing and customary closing conditions, including shareholder approval. Morgans canceled its first-quarter earnings call, which had been scheduled for yesterday.