UPDATED, 2:30 p.m., Oct. 9: Billionaire investor Ron Burkle is not expected to finalize his $800 million buyout of the Morgans Hotel Group before the Wednesday deadline for his merger agreement expires.
Burkle, along with Sam Nazarian’s SBE Entertainment, had six months to close the deal they signed an agreement on May 9 to buy the company for $2.25 a share, or about $800 million.
But the prospective buyers won’t close the deal by Wednesday’s deadline, the New York Post reported, and a rival bidder is planning to make a run at the company, which owns hotels such as the Hudson in Columbus Circle and Miami’s Delano South Beach. Burkle and Morgans did, however, extend the deadline to Nov. 30, according to filings with the Securities and Exchange Commission.
Morgans is thin on cash and needs to lock down a buyer or financing by the end of the year, the newspaper reported.
Burkle’s stake in the boutique hotel firm dates back to 2009, when is firm Yucaipa Cos. Lent $75 million to the struggling company amid the financial crisis.
Morgans apparently doesn’t have a way to pay the loan back, and the dividend on Burkle’s preferred shares are paying 20 percent interest – a figure that doubles to 20 percent on Oct. 18.
Burkle also holds the right to block major asset sales via warrants that can be exercised at $6 a share. A rival bidder would have to fork over roughly $135 million to retire his preferred stock. [NYP] – Rich Bockmann