Rambleside Offers to Buy Hotels Owned by Morgans Hotel
September 13 2015 - 11:10PM
Dow Jones News
A real estate investment firm offered to buy the two hotels
owned by Morgans Hotel Group Co., a move that could complicate the
lodging company's merger talks with hotelier Sam Nazarian's SBE
Entertainment Group.
In a letter sent Sunday to the Morgans board and reviewed by The
Wall Street Journal, New York-based Rambleside Holdings said it
would pay $507 million in cash to acquire the Hudson Hotel in New
York and the Delano Hotel in Miami Beach, Fla.
The letter also said Rambleside is prepared to buy the whole
company, but it didn't give any details on that offer. Morgans
manages a dozen hotels and owns brands including Mondrian and
Delano.
Rambleside holds about 4% of Morgans' stock, according to the
letter.
Howard Lorber, chairman of the Morgans board, declined to
comment on the letter in an interview Sunday but said, "We have a
process, and we're looking to do the best thing for
shareholders."
The Journal reported last month that Morgans and closely held
SBE were in talks for a deal that would create a company managing
19 hotels in cities including Los Angeles, New York, Miami and
London.
Like Morgans, shares of the combined company would be publicly
traded, according to a person briefed on the negotiations. Mr.
Nazarian, founder and chief executive officer of SBE, would be CEO
of the resulting company, according to people familiar with the
discussions. Morgans shareholders would get paid in stock in the
new company as part of the deal.
Gregory Cohen, Rambleside's chief executive officer, said in the
letter that a better way to maximize shareholder value would be to
sell the hotels and the management company separately.
"It is our understanding that almost all of the major
shareholders have communicated to the board, verbally and in
writing, the lack of enthusiasm and disapproval of the reported
potential transaction with SBE," Mr. Cohen wrote.
Mr. Nazarian declined to comment.
Rambleside may find its offer is a tough sell with the Morgans
board. Kim Opiatowski, an analyst at APB Financial who follows
Morgans, estimated the two hotels have a combined value of $641
million.
She added, however, that some Morgans shareholders have
indicated to her they would prefer a deal that pays them cash.
In May 2014, Morgans said it had hired Morgan Stanley to run a
review of strategic alternatives, including a possible sale of the
company.
Potentially complicating any deal for Morgans is investor Ronald
Burkle, whose preferred shares and warrants in the company give him
the right to block a sale in certain circumstances.
Mr. Burkle would have a board seat in a combined Morgans-SBE,
people familiar with the talks have said.
Rambleside is mostly an investor in rental properties, with a
portfolio of more than 1,500 apartment units, according to its
website. It has recently shown an activist streak, in June urging
New York REIT, a $1.6 billion real-estate investment trust, to sell
itself.
Write to Craig Karmin at craig.karmin@wsj.com and Liz Hoffman at
liz.hoffman@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 13, 2015 22:55 ET (02:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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