The Real Deal New York

Morgans shareholder files lawsuit over proposed SBE merger

Complaint seeks class-action status, calls deal “product of a flawed process”

May 27, 2016 06:22PM
By Rey Mashayekhi

Morgans SBE

From left: Howard Lorber and Sam Nazarian

The legal battle over SBE Entertainment Group’s acquisition of Morgans Hotel Group has kicked off – sort of.

On Friday, Morgans shareholder Jacquie Sinclair filed a lawsuit seeking class-action status against Morgans and its board of directors, as well as SBE, in relation to SBE’s proposed buyout of the struggling hotel operator.

The complaint, filed in New York State Supreme Court, seeks to block the buyout and claims it “is the product of a flawed process and deprives Morgans’ public stockholders of the ability to participate in the company’s long-term prospects.”

Los Angeles-based SBE, led by hotelier Sam Nazarian, and Morgans announced a deal earlier this month which will see SBE acquire Morgans for $2.25 per share. The transaction values Morgans at a total enterprise value of nearly $800 million.

In wake of news of the deal, securities law firm Rigrodsky & Long said it was investigating “potential legal claims” against the Morgans board regarding whether it properly marketed the company before striking the deal with SBE.

Sinclair, who is the only plaintiff listed on the complaint, is being represented in her action by law firm Brodsky & Smith. In a release sent out last week, Brodsky & Smith said it too was “investigating potential claims” against the Morgans board over “possible breaches of fiduciary duty.”

Neither Brodsky & Smith nor representatives for Morgans and SBE could be immediately reached for comment.

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