Delano Hotel
Morgan’s Hotel Group Co.’s largest shareholder is suing the company for allegedly reneging on a deal struck in March to sell it the Delano hotel in South Beach.
The Yucaipa American Alliance Fund, led by billionaire investor Ron Burkle, claims in a June 27 lawsuit filed in New York State Supreme Court that Morgan’s board of directors failed to sign off on the $200 million deal for the iconic South Beach hotel by a June 15 deadline.
The suit demands $9 million as a termination fee and another $1 million for the costs of indemnity.
At the company’s annual meeting June 14, shareholders, led by dissident director Jason Kalisman, ousted the incumbent board, Kalisman, the co-founder of OTK Associates, which holds a 13.9 percent stake in Morgan’s, has expressed opposition to the Delano deal.
A proxy fight at Morgan’s, which was founded by developer Ian Schrager and Studio 54’s Steve Rubell, has been brewing since 2009, when Yucaipa invested $72 million in the cash-strapped company in exchange for preferred, non-voting shares. Burkle separately owns more than 22,000 common shares in Morgan’s and voting rights.
In the suit filed last week, Yucaipa said that it sent a letter June 20 to the new Morgan’s board, demanding to know whether it intended to go through with the Delano sale. Yucaipa has not yet received a response, which it equates to a breach of the agreement.
Analysts said the Delano is no longer in financial straits, and the disputed deal is simply a proxy for a larger fight over control of the company.
“The reason why this is happening has little to do with the performance of the hotels themselves, but rather people smelling blood in the water and trying to make the best move,” Ben Thypin, director of market analysis at Real Capital Analytics, told The Real Deal.
In a separate suit filed July 1 in U.S. District Court, Burkle accused OTK Associates of using false and misleading proxy materials to take control of the board of directors. In the suit, Burkle claims that OTK misrepresented the recommendations of two outside firms, Institutional Shareholder Services Inc. and Glass Lewis & Co.
Burkle says that the firms recommended that four incumbent directors remain in power, and elect three members from the dissident slate.
A Morgan’s spokeswoman did not return calls.
via The Real Deal Miami http://feedproxy.google.com/~r/trdnews_miami/~3/mgGxGYTNtoE/
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