Trendy hotel chain Morgans Hotel Group and a large shareholder group have engaged PR and IR counsel in a showdown over a recapitalization plan with Yucaipa Companies, the firm of supermarket titan Ron Burkle and a creditor of Morgans.
Morgans, based in New York and originally founded by the two impresarios behind Studio 54, is pursuing a Yucaipa plan to raise money in a $100M stock offering and shed $230M in debt, following a 15-month "exploration process" of strategic alternatives by the Morgans board.
Under that plan, it would hand over ownership of its Delano South Beach hotel and The Light Group nightclub operator, while continuing to operate both.
Morgans has engaged Abernathy MacGregor Group – managing director Lex Suvanto and VP Neil Matland -- to burnish the deal and provide PR support.
But a group led by hedge fund chief Michael Olshan and the mall magnate Taubman family, owning 13.9% of Morgans outstanding shares, has launched a proxy fight, sued the company and blasted Morgans management over the deal, which it calls a "troubling transaction."
The group, organized as OTK Associates, hired Sard Verbinnen & Co for PR – managing director Dan Gagnier and principal Nathaniel Garnick – as well as Okapi Partners for IR/proxy support. It has offered a slate of seven board candidates as it vows to "refocus" the company and kill the Yucaipa deal.
The Wall Street Journal headlined the showdown "The Fight for Hip Hotel Firm."
Morgans hit back against OTK's PR offensive this week. " We do not believe it is productive to engage in an escalating battle of press releases with OTK," the company said in a statement, adding: "We are confident our shareholders will appreciate receiving the facts in a fair and balanced presentation rather than through OTK's self-serving press releases."
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