Preliminary results show that on Friday the shareholders of Morgans Hotel Group Co. voted to elect OTK Associates’ nominees for Morgans’ board of directors over management’s slate of candidates.
The new board of directors is set to include John Dougherty, Jason Kalisman, Mahmood Khimji, Jonathan Langer, Andrea Olshan, Michael Olshan and Parag Vora.
Certification of the final results by the independent inspectors of elections, IVS Associates, is expected to be complete later this week. OTK Associates, which is managed by billionaire A. Alfred Taubman and has a 13.9% stake in Morgans, launched the proxy battle in March after criticizing both management and board members for wasting resources and not capitalizing on the company’s potential over the past five years. In response Morgans Hotel Group Co., New York City, in April signed agreements with The Yucaipa Companies, the firm of billionaire Ron Burkle, to cancel Yucaipa’s interests in the Morgans’ convertible notes, preferred stock and stock warrants in exchange for the Morgans’ ownership interests in Delano South Beach and The Light Group. That deal seems unlikely to go ahead in light of the board shake-up. Whether the new board will move ahead with a sale of Morgans remains to be seen.
“The outcome of this vote sends a clear and irrefutable message from Morgans stockholders that meaningful change was needed at the company. We are gratified that Morgans stockholders have supported our efforts to bring about true accountability and oversight to Morgans’ board of directors and management,” said Michael Olshan, a founding member of OTK Associates that was among the seven nominees elected to Morgans’ board of directors. “The new board is eager to begin working constructively to address the company’s balance sheet and expense structure, and to run the company in a manner that is in the best interest of all stockholders. Importantly, we welcome Yucaipa’s and other stakeholders’ valued input and of course plan to honor all of the company’s previously negotiated commitments. We think Morgans’ best days are ahead and look forward to working together to return the company to its rightful place as the leading international boutique hotel platform.”
Yucaipa issued the following statement in response to the preliminary results:
“We understand that OTK has announced that the preliminary results of the Morgans proxy contest have resulted in the election of the OTK slate. If this turns out to be the final result, we are disappointed. We do not believe that OTK will begin a sales process for Morgans. Yucaipa continues to own all of Morgans’ preferred stock, over 50% of its convertible notes, and warrants for 12.5 million shares of its common stock. We also hold certain key consent rights and are well positioned to protect our interest in Morgans. We expect OTK’s reference to honor all of the company’s previously negotiated commitments includes these substantial obligations to Yucaipa as we intend to assert all of our rights and remedies to protect them, which we feel is best addressed by exploring strategic alternatives including a sale of the company. As previously disclosed, Morgans has received over nine expressions of interest in the company and to not follow up on these is clearly not in the best interest of all stakeholders.”