Orange Capital Issues Statement in Response to Strategic Hotels & Resorts

  Orange Capital Issues Statement in Response to Strategic Hotels & Resorts

 - Calls for a Committee of independent Directors to overhaul governance and
 explore all strategic alternatives; board members should be replaced if they
                                fail to act -

   - Notes Strategic’s poor corporate governance, demonstrated by numerous
    arrangements that entrenched and enriched management at the expense of
                                shareholders -

     - Highlights Institutional Shareholder Services’ recommendation that
  shareholders withhold votes for four of ten directors at Strategic’s 2012
                               annual meeting -

Business Wire

NEW YORK -- February 28, 2013

Orange Capital, LLC issued the following statement regarding Strategic Hotels
& Resorts’ (NYSE:BEE) (“Strategic” or the “Company”) February 19, 2013 public
response to Orange Capital’s letter urging an immediate sale of the Company.

Orange Capital’s statement is as follows:

We are disappointed by Strategic’s response to our February 1^st letter
(“Letter”) urging an immediate sale of the Company, and its continued refusal
to address the issues we raised as evident in yesterday’s earnings release.

Our Letter clearly outlined why a sale, with estimated proceeds of $11 – $14
per share, is the best path to maximize shareholder value. Despite claims of
transparent communications with its shareholders, the Company failed to
communicate which of our “assumptions and conclusions” it disagrees with, and
why a sale is not in the best interests of shareholders.

In addition, Strategic alleged that we made our Letter public to advance our
short-term trading interest. In fact, we have increased our holdings to
6,625,800 million shares since we published our Letter. We remain one of the
Company’s top 10 shareholders.

One key consideration in our urging for a sale is Strategic's poor corporate
governance. The Company has made numerous arrangements that have entrenched
and enriched management at the expense of shareholders. In light of this
pattern of behavior, including the Board’s failure to respond adequately to
our Letter, we demand Strategic immediately form a Special Committee of
Independent Directors and retain a financial advisor. The objectives of the
Special Committee would be to overhaul existing governance to conform with
industry "best practices" and explore all strategic alternatives, including a
sale, which we maintain is the best alternative for shareholders. Should the
independent directors fail to do so, they should be replaced.

We are not alone in identifying the governance shortcomings plaguing the
company. Institutional Shareholder Services ("ISS"), a leading independent
proxy voting and corporate governance advisory firm, recommended that
shareholders withhold votes for four of the Company’s 10 directors at
Strategic’s 2012 annual meeting, including the Company’s CEO Raymond Guellein.

The following are examples of how Strategic’s flawed governance practices have
impaired shareholder value:


In November 2012, the Company entered into a Separation Agreement with the
Company’s Former CEO, Mr. Laurence Geller. Under the agreement, Mr. Geller,
for a period of 18 months, is prohibited from making an offer to acquire the
Company or any of its assets. We see no circumstance whereby prohibiting an
individual, particularly one with the ability to assess the true value of
Strategic's assets, from buying the Company is in the best interests of
shareholders. We demand the Board immediately waive this standstill provision
in Mr. Geller’s Separation Agreement.


In August 2009, following a 99 percent drop in the Company’s share price, the
Board approved a “Value Creation Plan” awarding up to 2.5 percent of the
Company’s market capitalization to certain executives. This award was in
addition to already significant executive compensation, including an annual
cash bonus, restricted stock units and share options. We are perplexed that
this Board of Directors would approve an exceptional reward for the same
management team that overleveraged the Company and nearly wiped out its entire
market capitalization. Shareholders have suffered while management has
prospered. Strategic’s share price remains 68 percent below its previous high.

ISS shares our concerns on executive compensation. For three consecutive
years, it has highlighted a “pay-for-performance disconnect… due to guaranteed
equity grants, increases in long-term equity incentive values, poor
benchmarking practices and culmination of the Company's Value Creation Plan,
which provides excessive awards unlinked from Company performance.”


In November 2008, Strategic adopted a one-year shareholder rights plan
(“Poison Pill") citing the “significant dislocation in the equity markets and
challenging economic environment and outlook, particularly in the lodging
sector.” This Poison Pill was never put to a shareholder vote. While equity
markets have stabilized, Strategic has renewed its “one-year” Poison Pill four
consecutive times without a shareholder vote. There is no justification for
maintaining the Poison Pill other than to entrench management. We demand the
Board immediately terminate the Poison Pill.

ISS also gives Strategic poor marks on matters involving shareholder rights,
citing the Board’s failure to put the poison pill to a shareholder vote,
amongst other concerns.

We reiterate our beliefs that:

  *The best alternative to maximize shareholder value is an immediate sale of
    the Company;
  *A sale would likely result in proceeds of $11-$14 per share, or 49-90
    percent above the Company’s last closing price;
  *Private market values for luxury hotel properties far exceed public market
  *There is a large pool of well capitalized buyers for the Company’s luxury
  *Strategic’s large portfolio of luxury hotels is unique and has outstanding
    scarcity value;
  *Strategic is burdened with material corporate overhead diluting
    shareholder returns;
  *The Company has a material cost of capital disadvantage when compared to
    other owners of luxury hotels;
  *Strategic’s leveraged balance sheet offers few prospects for a return of
    capital to shareholders for the foreseeable future;
  *Strategic lacks brand value; and
  *Management lacks a credible plan for creating shareholder value.

We remain open to discussing our views with the Board.

About Orange Capital LLC

Orange Capital, LLC (“Orange Capital”) is a New York based investment firm.
The firm is a value oriented investor in event-driven securities. The firm
allocates across the capital structure on an opportunistic basis. Orange
Capital was co-founded in 2005 by Daniel Lewis and Russell Hoffman. Prior to
founding the firm, Orange Capital's portfolio manager, Daniel Lewis, was a
director with Citigroup's Global Special Situations Group.


For Media & Investor Inquiries:
ICR Inc.
Theodore Lowen, 646-277-1238
ICR Inc.
Jason Chudoba, 646-277-1249
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