Morgans Hotel Group to Acquire The Light Group

Morgans Hotel Group (MHG) announced that it has entered into a definitive agreement to purchase a 90% controlling interest in The Light Group (TLG), a lifestyle food and beverage company currently operating numerous venues for MGM Resorts International.

This acquisition, while being immediately accretive to the Company's earnings, also provides Morgans with a first class food and beverage platform, a creative and experienced management team, and renowned brand names.

"We believe the acquisition of The Light Group will position us to increase our food and beverage profits, drive average daily rate growth at existing hotels and win and service new management agreements," says Michael Gross, chief executive officer of Morgans Hotel Group. 

"The Light Group brings a proven track record of creating compelling food and beverage experiences that attract audiences and drive revenue. This transaction fulfills our strategic goal of having industry-leading F&B capabilities in-house. Combined with the recent improvements in our balance sheet and strong expansion pipeline, this is an important step in establishing the fundamentals we need to execute our vision and extend our position as a leader in global lifestyle hospitality management."

Gross continues, "The Light Group's existing business brings with it management agreements generating approximately $8 million of annual EBITDA, making this transaction immediately accretive to our EBITDA. Given The Light Group's strong relationship with MGM, this transaction provides new opportunities to work with MGM on strategic partnerships." 

TLG is a hospitality management company with a ten-year track record of delivering cutting-edge food and beverage experiences at world class properties.

TLG has already begun to execute a revitalization of the food, beverage and nightlife operations at Delano South Beach, which the Company expects will be substantially complete in January 2012.  With MHG having taken control of both the ownership and management of the Delano food and beverage operations in 2011, we expect to generate approximately $2 million of additional EBITDA in 2012 from these changes, before operational improvements. 

Morgans believes the acquisition will also allow it to recapture third party management fees and revitalize food and beverage operations at other existing and future properties and help grow its portfolio with new management contracts.

Total consideration for the acquisition is approximately $46.5 million, of which $28.5 million will be paid in cash at the close of the transaction. The remaining $18.0 million is subject to the achievement of $18.0 million of EBITDA from TLG's existing business over the 27 months subsequent to the transactions' closing and is represented by a convertible note that bears interest at 8%, matures four years from the date of closing and is convertible into shares of the Company at $9.50 per share.

The transaction is expected to close in the fourth quarter of 2011, and is subject to customary closing conditions.
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