OTK Associates LLC, the largest shareholder of Morgans Hotel Group Co. (Nasdaq: MHGC) with 13.9% of the outstanding common stock of the company, today commented on Morgans' agreements with The Yucaipa Companies.
As the largest shareholder of Morgans, OTK Associates is deeply concerned by the company’s announcement of a material transaction with an insider and major creditor during an ongoing proxy process. OTK Associates questions whether the board’s special committee has appropriately considered, in earnest,alternatives to consummating yet another ill-timed transaction with an interested party,especially given that two of Morgans' directors have a significant financial interest in the transaction.
Furthermore, the attempt to alter the previously announced shareholder record date for the Annual Meeting of Stockholders is a clear effort to circumvent the proxy process and disenfranchise shareholders of record at a time when a credible slate of alternative board members has been proposed for consideration.
The rights offering would advantage The Yucaipa Companies over all other shareholders who are subject to the company’s prohibitive poison pill threshold and coercively dilute existing shareholders who are unlikely to want to invest in the policies of the existing management and board.
The proposed transaction retroactively and deliberately delays the shareholder vote and, left unchallenged, this postponement allows Yucaipa to amass a significant voting equity position where there was none as of the previously established record date.
In addition to these concerns, the proposed transaction does almost nothing to address the ongoing fundamental issues plaguing the company’s operating performance, misalignment of interests and bloated overhead. Yesterday’s announcement is indicative of the type of insider dealings to which shareholders without proper representation will remain vulnerable barring significant change at the board level. In light of these developments, OTK Associates is evaluating all legal rights and remedies.
STOCKHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO SOLICITATION OF PROXIES BY OTK ASSOCIATES, LLC AND ITS AFFILIATES FROM THE STOCKHOLDERS OF MORGANS HOTEL GROUP CO. FOR USE AT THE 2013 ANNUAL MEETING OF MORGANS HOTEL GROUP CO. WHEN THEY ARE AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. WHEN COMPLETED, SUCH MATERIALS WILL, ALONG WITH OTHER RELEVANT DOCUMENTS, BE AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV OR BY CONTACTING THE PARTICIPANTS' PROXY SOLICITOR, OKAPI PARTNERS, TOLL FREE AT (877) 869-0171, OR BY EMAIL TO INFO@OKAPIPARTNERS.COM.
INFORMATION RELATING TO THE POTENTIAL PARTICIPANTS IN A POTENTIAL PROXY SOLICITATION IS CONTAINED IN EXHIBIT 1 TO THE SCHEDULE 14A FILED PURSUANT TO RULE 14A-12 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY OTK ASSOCIATES, LLC ON APRIL 2, 2013, AS IT MAY BE AMENDED FROM TIME TO TIME. THE SCHEDULE 14A AND ANY AMENDMENTS ARE AVAILABLE AT NO CHARGE ON THE SECURITIES AND EXCHANGE COMMISSION’S WEBSITE AT HTTP://WWW.SEC.GOV.