Transaction expands sbe's portfolio to 22 hotels, and 129 venues
The Yucaipa Companies consents to transaction and together with Cain Hoy Enterprises will hold substantial Preferred and Common Equity stake in sbe
Security Benefit to provide debt financing for recapitalization;
Ron Burkle and Jonathan Goldstein to join Sam Nazarian on sbe Board of Directors
NEW YORK, Dec. 2, 2016– sbe Founder and Chief Executive Officer Sam Nazarian today announced with partners Ron Burkle and Cain Hoy Enterprises the definitive closing of sbe's acquisition of Morgans Hotel Group, a move that further expands its international footprint and solidifies its unique position as the preeminent global leader of lifestyle hospitality management, entertainment, food & beverage and development. 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.
"sbe is the only global hospitality company that offers a complete 360-degree lifestyle experience, from hotels and residences to restaurants, entertainment and nightlife," says Nazarian. "Guests can stay, play, eat and indulge, all within our portfolio of assets."
The acquisition brings Morgans' iconic Delano and Mondrian brands – along with 13 domestic and international hotel management and franchise/licensing agreements – together with sbe's existing collection of notable hotel brands, which include such imprints as SLS hotels, The Redbury hotels, and Hyde hotels. sbe's award-winning restaurant brands include The Bazaar by José Andrés, Fi'lia by Michael Schwartz, Katsuya, Cleo, Umami Burger and Hyde Lounge. 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.
Nazarian adds, "The acquisition of Morgans not only further expands our offering – but brings the invaluable partnerships of Ron Burkle and Cain Hoy Enterprises. sbe will now have a presence from San Francisco to Doha; Los Angeles to London – and brings its impressive history, talented team and culture of service and innovation to the sbe family. We couldn't be more pleased about the transaction."
"Our successful two-year relationship with Cain Hoy and their talented leadership team headed by Todd Boehly and Jonathan Goldstein is a testament to Cain Hoy's vision and innovative investment philosophy of helping companies grow through invaluable guidance and capital," says Nazarian. "The shoulder-to-shoulder relationship that the sbe team and I have had with Cain Hoy has allowed sbe the confidence to pursue global and disciplined growth to the benefit of all of our shareholders."
THE FUTURE
sbe's growth will accelerate in coming months, further growing its footprint with the recent openings of The Redbury in New York and SLS Brickell in Miami, and four additional hotels expected to open in 2017, 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 feature a portfolio of 22 world-class international lifestyle hotels in global markets such as Los Angeles, New York, Las Vegas, Miami, San Francisco, Istanbul and London, in addition to residential properties within North America. sbe currently offers 129 hotel, entertainment, nightlife and restaurant venues globally.
sbe expects to integrate its brands and successful revenue-driven strategies throughout the Morgans portfolio, including cutting-edge marketing and sponsorship platforms, its innovative customer loyalty and rewards program, THE CODE, which boasts over 2 million members, and residential, service department, restaurant and hotel development and design operations.
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.
"I like to work with creative, strategic-thinking leaders, and Sam Nazarian is one of the best in the business," says Ron Burkle. "I'm excited to work with Sam and his exceptional team at sbe towards redefining the hospitality landscape."
Both Jonathan Goldstein of Cain Hoy and Ron Burkle will join Nazarian on sbe's Board of Directors.
BEHIND SBE
"My father Younes and my brother David have been a critical part of the development of sbe and I am thrilled to continue our work together and to collaborate on this next phase of the company with Jonathan Goldstein, Cain Hoy Enterprises and Ron Burkle, with Yucaipa's growing portfolio of world-class hospitality assets in Soho House, Sydell Group and Discovery Land Company. 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," says Nazarian. "Equally important, it gives us the flexibility to pursue growth opportunities."
"By adding the Morgans portfolio to sbe's existing stable of brands, I am confident that with Sam and his executive team at the helm, we will leverage this acquisition into strong growth for the company," says Jonathan Goldstein of Cain Hoy.
Dakota Development, the real estate development subsidiary of sbe, will have a prominent role in the development of sbe properties around the world.
The acquisition grows the number of sbe employees to 5,000, and will include the recruiting of additional top executives to lead critical disciplines throughout the organization.
Houlihan Lokey served as financial advisor and O'Melveny & Myers served as legal advisors to sbe on the transaction.
