NEW YORK, May 9, 2011 /PRNewswire/ -- Morgans Hotel Group Co. (NASDAQ: MHGC) ("MHG" or the "Company") announced today that it has entered into an agreement to acquire the remaining 50% interests that it does not already own in its food and beverage joint ventures from China Grill Management ("CGM") for approximately $20 million. The joint ventures operate, and CGM manages, restaurants and bars at Delano, Mondrian Los Angeles, Mondrian South Beach, Morgans, Sanderson and St Martins Lane.
The transaction will convert CGM's long-term management arrangements to short-term cancellable management agreements for each property. CGM will continue to manage the operations for a transitional period while Morgans reassesses its food and beverage strategy. As part of the agreement, MHG's ownership interest in the Asia de Cuba brand, and all intellectual property connected therewith, will be transferred to CGM. The transaction is expected to close in the second quarter of 2011 and is subject to satisfaction of certain closing conditions.
Michael Gross, Chief Executive Officer of MHG said, "We have had a great partnership with CGM for many years but we felt it was time to reassess our F&B strategy and consider alternative approaches to strengthening this important area of our business. We are actively reviewing all our food and beverage concepts and are excited about the opportunity to further enhance the buzz that makes Morgans special."
Based on 2010 results, the $20 million purchase price represents a 5.7x multiple on EBITDA of $3.5 million based on CGM's ownership and management fees. The $20 million purchase price will be funded through cash on hand generated through the recent sale of Mondrian Los Angeles. The ultimate cost to MHG may be reduced as the Company is in discussions with its owner partners at certain of the affected hotels to have certain of these food and beverage interests purchased by the respective hotel owners.
About Morgans Hotel Group
Morgans Hotel Group Co. (NASDAQ: MHGC) is widely credited as the creator of the first "boutique" hotel and a continuing leader of the hotel industry's boutique sector. Morgans Hotel Group operates Morgans, Royalton and Hudson in New York, Delano and Shore Club in South Beach, Mondrian in Los Angeles, South Beach and New York, Clift in San Francisco, Ames in Boston, Sanderson and St Martins Lane in London, and hotels in Isla Verde, Puerto Rico and Playa del Carmen, Mexico. Morgans also owns, or has ownership interests in, several of these hotels. Morgans Hotel Group has other property transactions in various stages of completion including a Delano in Cabo San Lucas, Mexico, a Delano in Turkey, a Mondrian in Doha, Qatar and a hotel in New York to be branded with one of MHG's existing brands. For more information please visit www.morganshotelgroup.com.
Forward-Looking and Cautionary Statements
This press release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs and prediction of certain future other events. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "expect," "anticipate," "estimate" "believe," "project," or other similar words or expressions. These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results or other future events to differ materially from those expressed in any forward-looking statement. Important risks and factors that could cause our actual results to differ materially from those expressed in any forward-looking statements include, but are not limited to economic, business, competitive market and regulatory conditions such as: a sustained downturn in economic and market conditions, particularly levels of spending in the business, travel and leisure industries; continued tightness in the global credit markets; general volatility of the capital markets and our ability to access the capital markets; our ability to refinance our current outstanding debt and to repay outstanding debt as such debt matures; our ability to protect the value of our name, image and brands and our intellectual property; risks related to natural disasters, such as earthquakes, volcanoes and hurricanes; hostilities, including future terrorist attacks, or fear of hostilities that affect travel; and other risk factors discussed in Morgans' Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and other documents filed by Morgans with the Securities and Exchange Commission from time to time. All forward-looking statements in this press release are made as of the date hereof, based upon information known to management as of the date hereof, and Morgans assumes no obligations to update or revise any of its forward-looking statements even if experience or future changes show that indicated results or events will not be realized.
SOURCE Morgans Hotel Group Co.
