SBE completes acquisition of Morgans Hotel Group

(SLS Beverly Hills)

In May, the "will-they/won't-they" relationship between SBE Entertainment Group and Morgans Hotel Group ended with SBE acquiring all of the outstanding shares of Morgans' common stock for $2.25 per share in cash.

Today, SBE founder and CEO Sam Nazarian—alongside partners Ron Burkle and Cain Hoy Enterprises—announced the definitive closing of SBE’s acquisition of Morgans Hotel Group, a move that further expands its international footprint. 

The transaction, which has a value of $805 million, more than doubles the number of hotels in SBE’s portfolio that includes more than 100 properties currently operating or in development.

The acquisition brings Morgans’ Delano and Mondrian brands—along with 13 domestic and international hotel management and franchise/licensing agreements–together with SBE’s existing collection of brands, which includes SLS hotels, The Redbury hotels, and Hyde hotels. 

As part of the Morgans acquisition, SBE takes direct ownership of the 194-room Delano Hotel in South Beach, the 878-room Hudson Hotel in New York City and the 372-room Clift Hotel in San Francisco.

“The acquisition of Morgans not only further expands our offering, but brings the invaluable partnerships of Ron Burkle and Cain Hoy Enterprises,” Nazarian said in a statement. “SBE will now have a presence from San Francisco to Doha; Los Angeles to London.”

Looking Ahead

SBE’s growth will accelerate in coming months, following the recent openings of The Redbury in New York and SLS Brickell in Miami. Four additional hotels are expected to open in 2017, including the Mondrian Doha, Qatar; as well as SLS Park Avenue New York, SLS Seattle and Hyde Hotel and Residences, South Florida. An additional nine hotels will be opening within the next two years, bringing SBE’s portfolio to 35 hotel properties by year-end, 2018. 

Upon the acquisition, the expanded company will operate under the name of SBE and will have a portfolio of 22 international lifestyle hotels globally.

Nazarian will retain all day-to-day management responsibilities and half of the common stock interests in SBE with the remaining half of the common stock and $150 million of newly issued preferred equity shared equally between Cain Hoy and Yucaipa. The acquisition necessitated Yucaipa’s support, which was provided given the opportunity.

Dakota Development, the real estate development subsidiary of SBE, will have a prominent role in the development of the company’s properties around the world.

“Cain Hoy and Yucaipa’s investment significantly improves SBE’s financial strength and provides us with the opportunity to invest funds to refresh the iconic Morgans-owned properties, Delano and Hudson,” Nazarian said. “Equally important, it gives us the flexibility to pursue growth opportunities.”

Both Jonathan Goldstein of Cain Hoy and Ron Burkle will join Nazarian on SBE’s Board of Directors. Houlihan Lokey served as financial advisor and O'Melveny & Myers served as legal advisors to sbe on the transaction.