Dealmaker: SBE to Buy Morgans Hotel Group for $794M

Hospitality company SBE, Los Angeles, agreed to acquire Morgans Hotel Group, New York, for $794 million. 

At closing, 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, Turkey, including its Hudson New York and Delano South Beach properties.

SBE said it will work with lenders to assume the mortgages of the Hudson and Delano properties, which total $422 million. The assumption will occur at closing.

Under the agreement, SBE will acquire all outstanding Morgans’ common stock for $2.25 per share in cash, exchange Morgans’ Series A preferred securities and assume Morgans’ debt. The per-share price represents a 54 percent premium over Morgans’ volume-weighted average price for the 30 days prior to May 5.

SBE plans to finance the transaction through selling new preferred equity in the newly formed company to third-party investors, refinancing its existing term loans and opening a new revolver.

SBE also expects to add five more hotel properties by the end of 2016 with the planned opening of SLS Brickell in Miami, Townhouse Hotel in Miami Beach, SLS Park Avenue in New York City, Hyde Hallandale in Florida and a planned hotel in the pipeline for the Mondrian Doha, for a total of 25 hotels by the end of this year.

Houlihan Lokey served as financial advisor and O’Melveny & Myers served as legal advisors to SBE. Morgan Stanley & Co. LLC served as financial advisor and Fried, Frank, Harris, Shriver & Jacobson LLP served as legal advisors to Morgans Hotel Group.