The Real Deal New York

Morgans Hotel Group, SBE merger talks break down

Activist shareholder Jason Kalisman helped scuttle the Ron Burkle-backed deal

November 05, 2015 02:55PM

Hudson Hotel in (inset from left: Jason

Hudson Hotel at 356 West 58th Street (inset from left: Jason Kalisman and Ronald Burkle)

Merger negotiations between the Morgans Hotel Group and Sam Nazarian’s SBE Entertainment broke down Thursday in the face of strenuous opposition to the deal from within the hotelier’s organization.

The talks broke down over a heated disagreement between Ronald Burkle, a preferred-equity holder in Morgans, and Jason Kalisman, a member of the company’s board and manager of OTK Associates, Morgans’ largest shareholder.

Burkle, a strong proponent of the deal, would have become chairman of the combined firm. He would also have acquired two of Morgans’ hotels in the deal: the Delano in Miami and the Hudson Hotel at 356 West 58th Street in Midtown. The hotels would have been valued at $590 million in that transaction.

Kalisman, the company’s former interim CEO and grandson of real estate mogul Alfred Taubman, opposed the deal, saying in a letter to the board that it ceded too much control of the company to Burkle, the Wall Street Journal reported.

The two men have been jockeying for control of the troubled firm for years. Back in 2013, Burkle said in a regulatory filing that Kalisman was “acting like a spoiled child” and “playing with the company as though it’s your new toy.”

The merger would have created a company, to be called SBE-Morgans, with a market capitalization of $260 million. Nazarian — whose firm manages various entertainment and hospitality brands like Katsuya restaurants, the Abbey nightclub in West Hollywood and SLS Hotels — would have become CEO.

Morgans, currently valued at about $120 million with $500 million in debt, owns hotel brands like Mondrain and Delano.

Over the summer, another activist investor in the company, Gregory Cohen of Rambleside Holdings, blasted the then-secret negotiations, saying Morgans was being undervalued.

In September, he placed an offer to buy the same two hotels from the firm at a price of $507 million. [WSJ]Ariel Stulberg

 

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