SBE, the Los Angeles-based owner
of the SLS, Redbury and Hyde brands of lifestyle hotels, will acquire New
York-based Morgans Hotel Group for $794 million in cash.
SBE will pay $2.25 a share in cash
for Morgans, both companies said Monday. That stock price is 18% more than
Morgan’s closing price Friday. That day, Morgans shares jumped 44%, suggesting
word of an impending buyout agreement in the marketplace late last week.
With the acquisition, SBE, which
also owns the Katsuya, Cleo and the Bazaar by Jose Andres restaurant brands,
will broaden its hotel inventory from seven to 20 properties and will operate hotels under
the Morgans, Mondrian and Delano brands.
“We have long admired Morgans, its
impressive history and culture of service and
innovation, so we’re delighted to
reach an agreement on this transaction, ” SBE CEO Sam Nazarian said.
With the buyout, which is expected
to close by year's end, SBE will take full ownership of ownership of San
Francisco’s Clift, New York’s Hudson and Miami’s Delano hotels. SBE is “working
with lenders” to assume the mortgages of the Hudson and Delano, which Morgans
put up for sale late last year.
Founded by Ian Schrager in 1983
(he sold his stake in 2005), Morgans had been trying to solidify its financial
footing amid years of management shakeups and slumping performance.
Last year, Morgans management was
removed from what was New York’s Mondrian SoHo by the owners (the property was
renamed NoMo SoHo) after a high-profile legal battle.
Shortly thereafter,
Morgans CEO Jason Kalisman resigned less than two years after leading a
shareholder proxy battle that resulted in the ouster of the previous board of
directors. That ouster was brought on in part because of shareholder
dissatisfaction in both the company’s performance and its plans to sell the
Delano.
The company in 2014 hired
Morgan Stanley to explore a sale of the company.
Morgans released its
first-quarter results Monday. The company’s loss narrowed 31% to $8.9 million,
although revenue fell 4.3%, to $51 million. Revenue per available room declined 5% from a year earlier.