Morgans Hotel — Proxy Contest (May 2013)
45 slides from Morgans Hotel's proxy contest presentation, May 30, 2013
Slide 1: Schedule 14A - Morgans Hotel Group Co.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A (RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant x Filed by a
Slide 2: Filing fee information
(5) Total fee paid: ¨ Fee paid previously with preliminary materials. ¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or t
Slide 3: Presentation to Institutional Shareholder Services
On May 30, 2013, Morgans Hotel Group Co. (the “Company”) made a presentation to Institutional Shareholder Services. A copy of the presentation is set forth below.
Slide 4: Morgans Hotel Group Co. Committed to Delivering Shareholder Value
MORGANS 2013 HOEL COMMITTED May GROUP CO. SHAREHOLDER VALUE TO DELIVERING
Slide 5: Forward Looking Information
Forward MORGANS This operating “expect,” reflect changes from conditions, debt “boutique” brands for documents to at status consummated. information 2results or Looking aconsummate the properly or presentation those of our fiscal and make in the events “endeavor,” performance current Information cir
Slide 6: Table of Contents
take control Table MORGANS Chapter Independent credible of Title alternative Contents without and HOTEL I. Executive thorough topaying GROUP create Summary review ashareholder premium process II. V. Clear value Morgans’ Proposed and OTKDemonstrated Deleveraging Slate Associates’ of Qualified Path tr
Slide 7: Executive Summary
Executive MORGANS •Company employees, By 4restructure The Morgans’ OTK Summary initiating Company proposed Associates, hasto failed the Board and explore HOTEL a proxy balance Deleveraging family recently toand LLC provide all fight GROUP its sheet friends, alternatives (“OTK”) explored management w
Slide 8: Clear and Demonstrated Path to Grow Value
MORGANS 5II. Clear and HOTEL GROUP Demonstrated Path to Grow Value
Slide 9: Clearly Defined Strategy
Clearly 1. 2. 3. 64. 2011,Defined MORGANS In Expand Invest Divest under in real our our Strategy HOTEL estate brand the product infrastructure direction assets and GROUP and management toservice and fund andsupervision organization our offerings expansion business of toto the globally enhance and cr
Slide 10: Successful Execution to Date
Successful MORGANS 1. 2. 3. 4. Signed Developed Successfully Added 7Sold Expand Invest Divest Execution Mondrian operational 8 to management real our robust enhance create HOTEL completed estate brand toagreements LospipelineDate ainfrastructure Angeles, scalable to operating and GROUP fund the mana
Slide 11: Highly Scalable Infrastructure
Highly •MORGANS Through Scalable HighlyScalable Fully-revamped Upgradedscalable Infrastructure thesenior above HOTEL Infrastructure infrastructure, marketing, operations improvements GROUPsales, team Providing providing inand technology, ourglobal infrastructure, Significant significant sales F&Bfor
Slide 12: Creating Long-Term Shareholder Value
Creating MORGANS Target Long-Term Limited •High Shareholder 9Shareholder 4 new Current Base Historical Incremental Incremental Signing fees contracts Capital infrastructure and Contracts: fees Value HOTEL cash of chain Value Investment per signed 2-4 Margins flow hotel GROUP service New 15-20 - Year
Slide 13: Clear Path to Significant Management Fee Growth
$ 70 $60 Clear MORGANS Gross Path Management $50 toHOTEL Significant $40 $30 Fee GROUP 1 Growth $20 Management $10 Fee Growth •$-A Ramp An The InTwelve 10x bidding October 8x Gaylord upmultiple inMonths war gross 2012, acquisition between paid fees Ended Marriott for enhances four Base March represe
Slide 14: Significant Value in Remaining Owned Assets
Significant MORGANS Delano Property •Hudson 11 Rooms: 2012 2012A Peak Value EBITDA: RevPAR: South EBITDA: in$11.0mm Information: 194 866HOTEL Beach $334 $175Two $22.0mm $43.0mmRemaining Owned Assets $13.8mm GROUP
Slide 15: Clear Path to Value Maximization
Clear MORGANS We Continue Strengthened Bolstered Monetized Restructure Earlier OTK 12 Have has and this taken to Made Articulated our real year, our expand HOTEL the operational estate all balance Significant we attractiveness efforts our entered GROUP to Path global sheet focus to infrastructure to
Slide 16: Steps Taken to Address Complicated Risk Profile
MORGANS III. 13 Steps Taken HOTEL to Address GROUP Complicated Risk Profile
Slide 17: Complicated Risk Profile
Complicated MORGANS Our Over-Levered Limits Restricts Corporate Through Additional circumstances Management Morgans’ 14 Board shareholders’ its flexibility current Governance is Equity ownership HOTEL Risk Focused business Balance Board Capital Profile toparticipation GROUP finance on development in
Slide 18: Board Focused on Enhancing Shareholder Value
Board MORGANS A Transaction On 180 Several Preliminary Greenhill The governance 15special the potential special implied Focused recommendation preliminary transaction &transaction issues and offers Co. valuation HOTEL investors on other rendered Enhancing received offers committee GROUP value-maximi
Slide 19: Benefits of Proposed Deleveraging Transaction
Benefits MORGANS Through $88 All Morgans’ Significantly Eliminate Yucaipa Would OTK 16 preferred million seeks eliminate significantly would of the obligations Dilutive Proposed to of proposed HOTEL Reduce improves stock stop convertible surrender Yucaipa’s Warrants this and increase Deleveraging De
Slide 20: Benefits of Proposed Deleveraging Transaction (cont.)
Benefits MORGANS Secure As Rights The Each Yucaipa We Backstop OTK 17 part would proposed right has Offering Long-Term of has of not unlikely the use would Proposed agreed HOTEL identified proposed Deleveraging approximately tocarry to Raise Management tobe Deleveraging GROUP fully aany Deleveraging
Slide 21: Impact on Balance Sheet
Impact MORGANS We Assuming Balance $Debt Potential $400 -1$500 $100 $200 $300 $322 Convertible OTK (1) 18 Q-13 557 Includes currently Value has Pro ofSheet Impact no Proposed no Forma ($ Notes the real HOTEL lack proposed in Transformation Light millions) of and Debt financial Trust proposed Delever
Slide 22: Analyst Reactions Supported Announcement
Our MORGANS “…Perhaps ago, “We and “MHGC’s the -“In Analyst (1) 19JMP Credit Sidoti, MKM Permission shares the served Analysis the are Securities, proposed Suisse, Partners, Reactions community company April constructive more proposed its most HOTEL ispurpose 30, to April Supported appealing Yucaipa
Slide 23: OTK Associates' Director Nominees Not Aligned with Shareholder Interests
MORGANS IV. 20 OTK Associates’ HOTELDirector GROUPNominees Not Aligned with Shareholder Interests
Slide 24: Status Update
Status MORGANS shareholders OTK In Board Morgans’ Deleveraging 21 fact, has is Update Yucaipa currently launched not taken Board HOTEL put Transaction unilateral proposed and forth reviewing a management proxy GROUP an action alternative oncontest May thistoproposal 16, team stop incredible an 2013
Slide 25: OTK Lacks a Credible Plan
OTKOTK MORGANS Luxury The OTK’s Obligations Convertible Less: Preferred Additional Delano Mondrian Hudson Cash Trust Working Deficit 22 attempt sale Preferred Available Generated Lacks Preferred “Plan” ($51.0) Marrakech Moscow hotel London of Capital Stock “plan” London Bahamas Revolver substantiall
Slide 26: OTK's Own Track Record Undermines Its Credibility
MORGANS OTK’s In committee OTK in Jason 23 our March was voted Taubman view, Own own 2013, offered asked to track that Track HOTEL allow Kalisman, Kalisman before Yucaipa him record the Record the opportunity GROUP urgently the original of could supported proposed OTK’s Undermines voting to become d
Slide 27: OTK's Own Track Record Undermines Its Credibility (cont.)
MORGANS The OTK transaction OTK’s 24 hedge voted entered Ownfund and at its inTrack HOTEL Morgans afavor Nominees’ value owned Record ofbelow GROUP the stock byactions Parag Company’s Undermines $15.20 at anVora, undercut average persay-on-pay one share Its cost Credibility OTK’s of OTK’s of $15.20
Slide 28: OTK's Slate Is Conflicted
OTK’s MORGANS Turning Five Two One In 25 fact, is are ofaan Slate there the control young hedge employee seven is HOTEL is afund Olshan not Taubman of Conflicted hand-picked the one of owner GROUP Board an family person family Olshan where Group over members OTK onmember family OTK’s the toofnominee
Slide 29: OTK's Slate Is Conflicted (cont.)
OTK’s MORGANS Michael public Andrea company Jason OTK; John Dougherty the 26 vice Dougherty, Taubman however, company Slate Olshan, president Olshan, experience. has is HOTEL several aKalisman, in age experience Conflicted age of reality 33, hotels 62, 30, GROUP Her other ishas ishe only the age the
Slide 30: OTK's Slate Is Conflicted (cont.)
OTK’s •MORGANS August million 27 According The Parag Jonathan Mr. Langer’s Vora Langer Taubman Whitehall Slate Vora, in 2008. 2009. has sole Langer, to is HOTEL has age American direct OTK’s apublic family Street Mr. Conflicted business 37, age Langer business is GROUP company proxy Real is 43, the
Slide 31: OTK's Slate Is Conflicted (cont.)
•MORGANS companies OTK’s 28 Mahmood Highgate In addition Slatepreviously slate–Khimji, of to American is HOTEL nominees abeing Conflicted age aGROUP made shareholder, Casino 52, areGroup aisnot proposal the &independent Entertainment co-founder ofinvestor Family, to takeand and Family over Propertie
Slide 32: OTK's Slate Is Conflicted (cont.)
•MORGANS OTK’s 29 Mr. Langer Jason Michael Khimji Slate director slate Taubman Olshan, of is HOTEL has nominees anominees Conflicted sat Kalisman’s Andrea on GROUP several two lack also Olshan, public Group only relevant have public public John company of limited Family, company experience Dougherty
Slide 33: OTK Associates ownership and family relationships
Beneficiary 13.9% 50% Owned Rober William OTK Michael GTK Children Andrea Managed Previous Owned Associates 2008 Taubman holder by: Olshan is Taubman Olshan to SEC by CEO T-OTK Mall Robert by of filings of T-OTK OMHGC LLC Properties Mall Family TRUST Taubman described Properties Bayshore founder and
Slide 34: OTK's Proposed Slate relationships
OTK’s Jason Andrea Michael 33 OTK 30 Jonathan John 43 Mahmood 62 Parag 52 Family 37 Business Personal Dougherty Associates Kalisman Vora Proposed Relations Olshan Olshan Relations Langer Relations Khimji 34 LLC Slate:Taubman Family and Family Friends Olshan Family
Slide 35: OTK Wants to Take Control Without Paying Any Premium
OTK Without MORGANS to •representative 32By Mr. OTK achieve nominating Kalisman Wants isPaying hasattempting its rebuffed to HOTEL own to Take later Any athe objectives slate Morgans’ Control to Board, proposed Premium GROUP take of seven control but of without attempts that to Morgans... was direct
Slide 36: Morgans' Slate of Qualified Directors
MORGANS V. 33 Morgans’ Slate HOTEL of Qualified GROUP Directors
Slide 37: Morgans' Slate of Qualified Directors Will Remain Focused
Morgans’ MORGANS •nominee The 34 We OurBoard offered are director Corporate slate receptive nominating consents Slate is will HOTEL to comprised nominees re-nominate of continue Governance Qualified to to serve six shareholder GROUP of directors are towith six explore focused Mr. Directors and nomin
Slide 38: Morgans' Slate of Qualified Directors
Morgans’ •MORGANS investing Morgan’s 35We Eachbelieve Except Our directors offor and the Slate board our HOTEL our Board’s real have of is CEO, director estate, Qualified experienced, aGROUP six deep allwith director nominees areunderstanding Directors independent each has nominees director have the
Slide 39: Director Biographies
Director Biographies MORGANS HOTEL Age GROUP Experience Brings to the Board Michael Ron Burkle Gross 37 60 Founder countries offering, •Capital Our CEO Under Prior B.S. from research Advisors, Mr. of and around The since Cornell Gross’ sold Yucaipa and the 2011 LLC, real leadership, University’s inv
Slide 40: Director Biographies (cont.)
Director Biographies MORGANS HOTEL Age (cont.) GROUP Experience Brings to the Board Harrison Thomas 65 •provides Current achairman Previouslybroad served range of as Diversified co-chairman of marketingAgency ofcommunication the New Services York(aChapter services divisionofofthe Omnicom U.S. Olympi
Slide 41: Compensation Design & Structure
Compensation MORGANS •Ø 38 The We Our Compensation Thecurrently emphasize employ do re-pricing NEO program Compensation not compensation provide HOTEL a do Design provides stock of abased not pay-for-performance stock tax single-trigger plan GROUP provide Committee & ongross-up for options Structure
Slide 42: Compensation Practices and Policies
Compensation MORGANS •with ØWhile in ØWe other ØThe 39Aligning Although We The Our Reviewing favor those prohibit have believe new Company Company’s insider Compensation of anmembers an management’s of the we endorsement and HOTEL trading the independent stockholders executive say-on-pay do Practice
Slide 43: Committed to Strong Corporate Governance
Committed MORGANS •Transaction 40 Annual All Andrew Another We The Termination Board Our of strongly Board Corporate CEO our composition election say-on-pay Sasson, Board is current 2013 tohas recently of HOTEL not encourage of Strong Directors Governance also member the director the of the director
Slide 44: Important Additional Information
Important •MORGANS strongly with 41On the MaySEC advised Additional 23,HOTEL from 2013, to the read the Information GROUP SEC’s Company the Company’s website filedata2013 www.sec.gov definitive proxyproxy statement or the statement Company’s because anditWHITE contains website proxy atimportant www.
Slide 45: Important Additional Information and Where to Find It
Important Additional Information and Where to Find It On May 23, 2013, the Company filed a definitive proxy statement and WHITE proxy card with the SEC in connection with the solicitation of proxies for its 2013 Annual Meeting of Stockholders. Stockholders are strongly advised to read the Company’s