Morgans Hotel Group Co. (NASDAQ:MHGC), (“Morgans”) today announced
it has entered into a definitive agreement under which Morgans will
be acquired by leading global lifestyle hospitality company SBE.
Under 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.
Howard M. Lorber, Morgans Chairman, said, “Morgans’ Board of
Directors 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.”
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 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.
In light of today’s announcement, the Company’s first quarter
earnings call, previously scheduled for today at 5:00 PM Eastern
Time (U.S.) has been cancelled.
Morgan Stanley & Co. LLC served as financial advisor and
Fried, Frank, Harris, Shriver & Jacobson LLP served as legal
advisors to Morgans Hotel Group.
About Morgans Hotel Group
Morgans Hotel Group Co. (NASDAQ:MHGC) is widely credited as the
creator of the first “boutique” hotel and a continuing leader of
the hotel industry’s boutique sector. Morgans Hotel Group operates
Delano in South Beach, Mondrian in Los Angeles, South Beach and
London, Hudson in New York, Morgans and Royalton in New York, Clift
in San Francisco, Shore Club in South Beach and Sanderson and St
Martins Lane in London. Morgans Hotel Group has ownership
interests or owns several of these hotels. Morgans Hotel Group also
licenses its brand through Delano in Las Vegas and 10 Karaköy in
Istanbul, Turkey. Morgans Hotel Group has other hotels in
various stages of development to be operated under management or
franchise agreements, including a Mondrian property in Doha, Qatar
and a Delano in Dubai. For more information please visit
www.morganshotelgroup.com.
Important Information About the Transaction and Where to
Find ItIn connection with the proposed transaction,
Morgans will file with the Securities and Exchange Commission
(“SEC”) a proxy statement. Morgans may also file other documents
with the SEC regarding the proposed transaction. MORGANS
STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS THAT ARE FILED WITH THE SEC, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN
THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION AND RELATED MATTERS. Morgans stockholders may
obtain free copies of the proxy statement (when available) and
other documents filed with the SEC by Morgans through the web site
maintained by the SEC at www.sec.gov or by contacting the investor
relations department of Morgans at (212) 277-4188.
Participants in the Solicitation Morgans and
its directors and executive officers may be deemed to be
participants in the solicitation of proxies in respect of the
proposed transaction. Information about the directors and executive
officers of Morgans is contained in Morgans’ Form 10-K for the year
ended December 31, 2015 and its proxy statement filed on April 15,
2016, which are filed with the SEC. Information regarding the
identity of the potential participants, and their direct or
indirect interests in the transaction, by security holdings or
otherwise, will be set forth in the proxy statement and other
materials to be filed with SEC in connection with the
transaction.
Legal Notice Regarding Forward-Looking
Statements
This press release, and the documents to which Morgans refers in
this communication, contain not only historical information, but
also forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements represent Morgans’ expectations or
beliefs concerning future events, including the timing of the
transaction and other information relating to the transaction.
Forward-looking statements include information concerning possible
or assumed future results of operations of Morgans, the expected
completion and timing of the transaction and other information
relating to the transaction. Without limiting the foregoing, the
words “believes,” “anticipates,” “plans,” “expects,” “intends,”
“forecasts,” “should,” “estimates,” “contemplate,” “future,”
“goal,” “potential,” “predict,” “project,” “projection,” “may,”
“will,” “could,” “should,” “would,” “assuming” and similar
expressions are intended to identify forward-looking statements.
You should read statements that contain these words carefully. They
discuss Morgans’ future expectations or state other forward-looking
information and may involve known and unknown risks over which
Morgans has no control. Those risks include, (i) the risk that the
transaction may not be completed in a timely manner or at all,
including by reason of the unavailability of financing, which may
adversely affect Morgans’ business and the price of the common
stock of Morgans, (ii) the failure to satisfy any of the conditions
to the consummation of the transaction, including the adoption of
the acquisition agreement by the stockholders of Morgans, the
assumption or refinancing of Morgans’ mortgage loan agreements and
the receipt of governmental and regulatory approvals, (iii) the
occurrence of any event, change or other circumstance that could
give rise to the termination of the acquisition agreement, (iv) the
effect of the announcement or pendency of the transaction on
Morgans’ business relationships, operating results and business
generally, (v) risks that the proposed transaction disrupts current
plans and operations and the potential difficulties in employee
retention as a result of the transaction, (vi) risks related to
diverting management’s attention from Morgans’ ongoing business
operations and (vii) the outcome of any legal proceedings that may
be instituted against us related to the acquisition agreement or
the transaction. Forward-looking statements speak only as of the
date of this communication or the date of any document incorporated
by reference in this document. Except as required by applicable law
or regulation, Morgans does not undertake to update these
forward-looking statements to reflect future events or
circumstances.
Contacts:
Investors
Richard Szymanski
Morgans Hotel Group Co.
212.277.4188
Media
Stephanie Pillersdorf/Pamela Greene/Patrick Scanlan
Sard Verbinnen & Co
212.687.8080
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