Shareholders at Morgans Hotel Group have voted overwhelming in support of a proposal by two New York families to replace the existing board of directors and put their children at the helm of the company.
Dissident shareholders OTK Associates – jointly-owned by the Olshan and Taubman families – said the outcome sent a “clear and irrefutable message” that change was needed at the company.
In the lead up to the proxy contest vote, held this month, the boutique hotel group’s chief executive, Michael Gross, warned shareholders that turning full control of the board to the hotel’s majority shareholder was not in the company’s best interests.
He said Michael Olshan, Andrea Olshan and Jason Taubman Kalisman did not have the relevant business, industry or public company experience to qualify them to serve as directors.
A statement released by holding company Yucaipa – owned by existing board member Ron Burkle – said the outcome was "disappointing".
Yucaipa owns all of Morgans' preferred stock, over 50% of its convertible notes, and warrants for 12.5 million shares of its common stock.
It said the company's previously negotiated commitments included "substantial obligations" to Yucaipa and it intended to assert "all of our rights and remedies to protect them". OTK said in a statement this would be honoured.
Indications the existing board would sell the hotel group if re-elected had prompted Morgans' share price to rise in the lead up to the vote – only to fall again when the results were announced.
In a statement released following the shareholder vote, Michael Olshan said: “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.”
Morgans was founded by Ian Schrager and Steve Rubell – the developers behind famous nightclub Studio 54. The group’s portfolio includes hotels in New York, Miami, London and Marrakech.