SBE To Buy Morgans Hotel Group

(RTTNews) - Morgans Hotel Group Co. (MHGC) said that it has entered into a definitive agreement under which Morgans will be acquired by leading global lifestyle hospitality company SBE. As per terms of the agreement, SBE will acquire all of the outstanding shares of Morgans common stock for $2.25 per share 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, 2016, and a 54 percent premium to Morgans' volume weighted average price for the 30 days up to and including May 5, 2016.

As part of the transaction, affiliates of The Yucaipa Companies will exchange $75 million in Series A preferred securities, accrued preferred dividends, and warrants for $75 million in preferred shares and an interest in the common equity in the acquirer and, following the closing, the leasehold interests in three restaurants in Las Vegas currently held by Morgans.

At closing, SBE will acquire Morgans' portfolio of thirteen 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. SBE is currently working with the lenders to assume the mortgages of the Hudson and Delano properties, approximately $422 million, and expects this to occur at closing.

The transaction, which was approved by the Board of Directors, is expected to close in the third or fourth quarter, and is subject to regulatory approvals, the assumption or refinancing of Morgans' mortgage loan agreements, and customary closing conditions, including approval of the transaction by Morgans shareholders. Morgans shareholders representing approximately 29 percent of the Company's outstanding shares of common stock have signed voting agreements in support of this transaction, including OTK Associates, Pine River Capital Management and Vector Group Ltd. Affiliates of The Yucaipa Companies have also signed a voting agreement in respect of their Series A preferred securities and warrants.

SBE noted that it has obtained commitments to finance the transaction through a combination of proceeds from the sale of new preferred equity in the newly-formed company to a third-party investor, liquidity from the refinancing of its existing term loans and a new revolver.