Morgans Hotel Group Co. today agreed to postpone a $6-a-share rights offering until at least May 16, while dissident investors seek to block a recapitalization plan with billionaire Ron Burkle’s Yucaipa Cos., court papers show.
OTK Associates LLC, Morgans’s largest shareholder, yesterday asked a Delaware Chancery Court judge for permission to join a lawsuit challenging the board’s approval of the plan.
OTK, owner of 13.9 percent of Morgans’s outstanding common shares, said the vote was designed to dilute its stake and disrupt a proxy contest the firm was pursuing.
Jason Taubman Kalisman, a Morgans director and co-founder of OTK, alleged in a complaint unsealed this week that the vote was invalid because inadequate notice was given of a March 30 directors’ committee meeting.
“OTK seeks to protect its interests, and the interests of all Morgans’ stockholders in meaningful exercise of its voting rights, and to prosecute certain board members for their breaches of fiduciary duty,” OTK said in a filing yesterday in Delaware Chancery Court in Wilmington.
OTK said in March that it planned to nominate seven directors to the boutique-hotel operator’s board. OTK accused the current board of engaging in self-serving deals.
Morgans, based in New York, said April 1 that Los Angeles-based Yucaipa will swap interests in the company’s convertible notes and preferred stock for its ownership in the Delano South Beach hotel in Miami Beach, Florida, and the Light Group.
Yucaipa will also backstop the $100 million, $6-a-share rights offering available to shareholders with no fees if the rights aren’t fully exercised, Morgans said.
OTK and Kalisman accused Morgans’s directors of rushing to complete the deal before a stockholders meeting initially scheduled for May 15 and now scheduled for July 10.
In a filing today, Morgan lawyer Raymond DiCamillo asked Chancery Judge J. Travis Laster to schedule a hearing on a preliminary injunction before May 15.
The case is Kalisman v. Friedman, 8447, Delaware Chancery Court (Wilmington).