Morgans Hotel Group Co. (MHGC) investors voted to elect all seven board members proposed by OTK Associates LLC, the company’s largest shareholder, according to preliminary results.
Stockholders chose the OTK-proposed nominees at Morgans’s annual meeting today in New York, according to Dan Gagnier, an OTK spokesman with Sard Verbinnen & Co., citing initial results after the meeting had ended.
OTK, owner of about 14 percent of New York-based Morgans’s shares, sought to overhaul the board to try to return the company to profitability. Morgans, which operates hotels including the Mondrian in Los Angeles and the Delano in Miami’s South Beach, has lost money each quarter since 2007, according to data compiled by Bloomberg. Billionaire Ron Burkle’s Yucaipa Cos. is a major investor in the company through holdings of preferred stock, notes and warrants.
Morgans shareholders elected John Dougherty, Jason Kalisman, Mahmood Khimji, Jonathan Langer, Andrea Olshan, Michael Olshan and Parag Vora, OTK said in a statement today. Final results are “expected to be completed shortly,” the company said. Kalisman was already a director.
“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,” Michael Olshan, a founding member of OTK, said in the statement.
Morgans fell 1.2 percent to $7.47 at the close of New York trading. The stock climbed to the highest in almost two years on June 4 after the company said it received interest in a takeover and would consider a sale if its current board were re-elected.
“The stock is reacting to the uncertainty over what OTK’s actual intentions are,” Chris Agnew, a Stamford, Connecticut-based analyst at MKM Partners LLC, said in a telephone interview. “The original Morgans board was very clear on that they wanted to expedite the strategic process, including a possible sale. While I think OTK will end up doing the same, nobody is sure as to how and when they may do that.”
Lex Suvanto, a spokesman for Morgans with Abernathy MacGregor Group, declined to comment on the vote.
OTK in April sued Morgans board members over a recapitalization deal with Yucaipa. OTK called a proposed swap for the Delano South Beach and a $100 million rights offering “insider dealings” that would benefit Yucaipa while Burkle was on the board.
Burkle has the right to one board seat. Yucaipa owns all of Morgans’s preferred stock, more than half its convertible notes and warrants for 12.5 million shares, according to the investment company.
“We are disappointed,” Yucaipa said in a statement late today. “We do not believe that OTK will begin a sales process for Morgans.”
Yucaipa’s stake in Morgans would be best protected “by exploring strategic alternatives including a sale of the company,” the Los Angeles-based investment firm said. “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.”
Institutional Shareholder Services Inc. and Glass Lewis & Co. on June 5 recommended that investors vote for three of the seven board nominees proposed by OTK. Institutional Shareholder Services had recommended votes for Kalisman, Khimji and Langer. Glass Lewis advised voting for Kalisman, Khimji and Dougherty.
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