Shareholder OTK leads ouster of Morgans board of directors
By Danny King
Morgans Hotel Group, the parent of bou-tique-hotel brands Mondrian and Hudson
in addition to its flagship badge, found its
leadership in flux last week after its largest shareholder successfully led an effort to
have the company’s directors voted out.
The shareholder, OTK Associates, which
owns 14% of the company, submitted a
seven-member board slate. In a June 14
shareholder vote, the insurgent slate on
average received more than three times the
number of votes cast for the current board,
Morgans said in a June 18 filing with the
Securities and Exchange Commission.
According to the filing, the new board
members have been elected to one-year
terms, which will end next June during
Morgans’ annual shareholders meeting.
The OTK board includes OTK founding member Michael Olshan, Olshan Hotel
Management Vice President John Dough-erty, Highgate Holdings co-founder Mah-mood Khimji and former Kerzner International Resorts director and ex-Goldman
Sachs managing director Jonathan Langer.
The former board included Morgans
CEO Michael Gross and supermarket mag-
nate Ron Burkle, head of Morgans’ primary
debt holder, Yucaipa Cos. Gross, a former
executive with Yucaipa, was named Mor-
gans’ CEO in 2011.
The vote ushers in a new
chapter for Morgans,
which was launched by Ian
Schrager in 1984.
half of its price when the company went
public in 2006.
More recently, Morgans’ proxy battle with
OTK heated up as OTK accused company
management of both mismanagement and
being overly influenced by Yucaipa. In April,
OTK threatened legal action after management pitched an agreement to sell its interests
in Miami’s Delano to Yucaipa and sell $100
million worth of stock to reduce its debt.
Morgans’ deposed board said earlier this
month that it would try to sell the company
upon board re-election, adding that OTK’s
proposed board would cause a “stalemate”
with Yucaipa and would be ineffective at
addressing the company’s debt issues.
And despite the ouster, there remains
shareholder interest in selling the company.
On June 20, Kerrisdale Capital Management, which owns 4.3% of the company,
also urged a sale. Kerrisdale, in a letter to
shareholders and management, cited what it
said was a lack of clarity in OTK’s stated direction for Morgans, the stock’s 10% decline
the day the voting results were announced
and Kerrisdale’s belief that Morgans is more
valuable as a division of a better-capitalized
company than as a standalone entity.
Kerrisdale cited Le Meridien’s 2005 buyout
by Starwood as an example of a potentially
positive outcome for Morgans.
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