Morgans Hotel Agrees to $794 Million Purchase by Nazarian's SBE

  • Acquisition price is $2.25 a share in cash, a 69% premium
  • Burkle's Yucaipa to take stake in SBE as part of deal

Morgans Hotel Group Co., the operator of properties including the Mondrian in Los Angeles and Royalton in New York, said it agreed to be purchased by Sam Nazarian’s SBE for $2.25 a share in cash.

The per-share price is 69 percent more than Morgans’ May 5 closing price, Morgans said in a statement Monday. With the assumption of debt and transfer of capitalized leases, the total enterprise value of the deal is about $794 million, Morgans said.

The company, which manages nine high-end hotels in North America, said last year it hired Morgan Stanley to explore strategic alternatives, including a possible sale. New York-based Morgans in August was close to an agreement to merge with SBE, two people with knowledge of the discussions said at the time. Investor Rambleside Holdings criticized that potential deal and what it called Morgans’s “blatant disregard” for timely action to preserve shareholder value.

The Morgans board “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, while providing a great home for our attractive assets under a renowned hospitality company in SBE,” Morgans Chairman Howard Lorber said in the statement.

As part of the transaction, affiliates of Ron Burkle’s Yucaipa Cos. will exchange $75 million in preferred securities, dividends and warrants for an equity stake in SBE and, after the deal’s closing, the leasehold interests in three restaurants in Las Vegas currently held by Morgans.

SBE, with brands including SLS, Hyde and Redbury hotels, said it will receive a “significant investment” from Cain Hoy Enterprises as part of the deal. Burkle and Cain Hoy Chief Executive Officer Jonathan Goldstein will join the board, SBE said in a separate statement.

Shares of Morgans jumped 10 percent on Monday to close at $2.10. They have fallen 68 percent in the past 12 months.

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