This story has been updated to more accurately reflect the value of the deal.

Hotel and nightclub mogul Sam Nazarian is buying a boutique hotel group in a deal that will give billionaire investor Ron Burkle a significant stake in the new company.

Nazarian’s SBE Entertainment Group, based in Mid-Wilshire, is picking up New York-based Morgans Hotel Group for about $82 million, which amounts to $2.25 per share. After the takeover, SBE would be worth about $800 million.

As part of the transaction, affiliates of Burkle’s West Hollywood-based Yucaipa Cos. would exchange $75 million in Series A preferred shares in Morgans, as well accrued dividends and warrants, for $75 million in preferred shares and common equity in SBE, according to a press release. Those Yucaipa affiliates would also control leasing interests in three Las Vegas restaurants held by Morgans.

SBE would acquire Morgans’ portfolio of 13 owned, operated, or licensed hotels in London, Los Angeles, New York, Miami, San Francisco, Las Vegas and Istanbul, including its Hudson New York and Delano South Beach properties.

SBE’s new portfolio would include 20 hotels and more than 90 restaurants.

Cain Hoy Enterprises, a New York-based real estate investment firm, is helping finance the transaction, which will give its chief executive Jonathan Goldstein a seat on SBE’s board. The financing cost was not disclosed.

Nazarian, SBE’s chief executive, would retain majority ownership of the company.

“Our strategic vision is to operate these amazing and unique lifestyle properties in key international gateway markets,” he said in a statement.

For reprint and licensing requests for this article, CLICK HERE.