With Heavy Lifting Done, Morgans Hotel Could Be Primed for Sale

NEW YORK (The Deal) -- Many followers of New York hotel operator Morgans Hotel Group (MHGC) have believed for quite some time that it's ripe for a sale. One analyst thinks the moment has finally come.

Jason Kalisman, Morgans' interim CEO, "wanted to first line up the balance sheet and cut costs before he would do anything else and he executed that plan," said Kim Opiatowski, an analyst at APB Financial Group, in a phone interview. "Now we are at the point where all the heavy lifting is done [and] it's time to sell the properties and sell the company."

On Friday, Opiatowski increased her price target to $14 per share, or $481.6 million, from $12 per share.

Sources close to the situation have said Kalisman, whose hedge fund OTK Associates took over control of Morgans two years ago, wouldn't sell unless the company was able to fetch a valuation in the mid-teens, which is the price where OTK first acquired a stake. Kalisman declined comment on Friday.

"Morgans Hotel Group is a dramatically different company than it was a year ago," Opiatowski wrote in note issued Friday. "The company went from bleeding cash, ensnared in lawsuits, and expense-heavy to running like a skilled boutique hotel operator."

On March 13, Morgans reported full-year earnings results for 2014, notching a 5% increase in Ebitda to $55.1 million from $52.2 million the prior year. The highlight of the announcement, however, was that the company had $1.4 million in operating income in 2014, compared to negative $1.9 million in 2013.

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