Morgans Jumps to Highest Since 2011 on Sale Consideration
Morgans Hotel Group Co. (MHGC), a hotelier embroiled in a proxy battle with its largest stockholder, climbed to the highest in almost two years after saying it has received interest in a takeover and would consider a sale.
The company’s board nominees plan to explore strategic alternatives, including a sale, if they are re-elected, New York-based Morgans said today in a statement. The company, which operates hotels including the Mondrian in Los Angeles and the Delano in Miami’s South Beach, said it has received unsolicited expressions of interest in a takeover from five investors.
Morgans shares rose 13 percent to $7.53, the highest closing price since July 2011. The stock has gained 36 percent this year.
“Morgans’s Delano, Mondrian and Hudson brands would be desirable brands for better-capitalized, larger hotel franchisors seeking to grow their room pipeline in the boutique segment,” Stephen Altebrando, an analyst at Sidoti & Co. in New York, said in a research note. “A combination would also eliminate the company’s high debt costs and provide capital to expand the management pipeline.”
Altebrando has a buy rating on Morgans stock.
OTK Associates LLC, which owns about 14 percent of Morgans’s shares, is seeking to overhaul the board to try to return the company to profitability. Morgans, which includes 13 boutique hotels, has lost money in every quarter since 2007, according to data compiled by Bloomberg.
OTK said Morgans’s announcement is an attempt to undermine the proxy battle and that the company is “highly unlikely” to pursue a sale, according to a statement.
OTK in April sued board members over a recapitalization deal with billionaire Ron Burkle’s Yucaipa Cos. Jason Taubman Kalisman, a founding member of OTK, is currently a director. He has a slate of seven nominees to the board, which will be decided at the company’s annual meeting June 14.
Morgans’s hotels would be attractive to operators seeking to add boutique brands, said Chris Agnew, a Stamford, Connecticut-based analyst at MKM Partners LLC. The company said last month it had received a $7.50-a-share takeover offer from a “large international hotel company” late last year that it rejected as too low.
“Everyone is interested in the younger generation today and is looking at how to make their brands relevant and attractive to this type of consumer,” said Agnew, who has a neutral rating on the stock. “Morgans has these brands that quite neatly fit into this category.”
Morgans last week said its board voted to end a poison-pill plan and instated a new policy requiring shareholder approval of any future rights provision. Poison pills are used to discourage takeover bids by making companies less attractive to potential buyers.
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