Morgans Hotel Group has received a bid from a party
identified only as “Bidder V” to acquire the hotel group for $2.75 per share,
delaying Morgans’ shareholder vote on its pending acquisition by SBE Entertainment Group.
Morgans said it has not, however, changed its recommendation
in favor of the SBE merger.
In May, it was announced that SBE would acquire Morgans for
$794 million in cash, paying $2.25 per share. That deal is backed in part by
affiliates of the Yucaipa Companies, an investment firm founded by investor Ron
Burkle.
On July 18, Bidder V made an unsolicited proposal to acquire
Morgans for $2.75 per share. Morgans said it reached out to Bidder V on several
occasions urging it to work toward a more definitive proposal prior to the
stockholder vote on the SBE transaction, which had been scheduled for Sept. 14.
Bidder V submitted a new letter this week, reconfirming its
interest in acquiring Morgans and including a letter from a new potential
financing source that would provide up to $500 million in capital in support of
the acquisition.
As such, Morgans adjourned its Sept. 14 stockholder meeting
to consider Bidder V’s latest disclosures. The meeting was adjourned to Sept.
26.
According to a statement, during a Morgans board meeting
earlier this week, “the board noted that there are significant concerns with
regard to the certainty and timing of any potential transaction with Bidder V,
including concerns relating to the credibility and financial capacity of Bidder
V and its financing source, and Bidder V’s ability to assume or refinance
Morgans’ existing mortgage debt and otherwise to obtain the necessary financing
to consummate a transaction.
“The board noted that almost two months have passed since
the initial proposal by Bidder V, Bidder V has not addressed these significant
concerns during that time period and Bidder V’s proposed financing source
differs from Bidder V’s initial proposal.”