Morgans Hotel — Proxy Contest (April 2014)
33 slides from Morgans Hotel's proxy contest presentation, Apr 23, 2014
Slide 1: Schedule 14A Definitive Additional Materials
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: Presentation to Institutional Shareholder Services
(4) Date Filed: On April 22, 2014, Morgans Hotel Group Co. (the “Company”) made a presentation to Institutional Shareholder Services. A copy of the presentation is set forth below.
Slide 3: Morgans Hotel Group April 2014
MORGANS HOTEL GROUP APRIL 2014
Slide 4: Forward Looking Statements
Forward Looking Statements This presentation may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs. F
Slide 5: Agenda
AGENDA CURRENT BOARD’S STRATEGY FOR COMPANY, AS INITIALLY COMMUNICATED LAST YEAR AND OVERWHELMINGLY ENDORSED BY THE STOCKHOLDERS OF THE COMPANY, REMAINS THE MOST LOGICAL STRATEGY STABILIZES AND STRENGTHENS MORGANS WHILE MAXIMIZING OPTIONALITY CURRENT BOARD CONTINUES TO SUCCESSFULLY EXECUTE THIS STRA
Slide 6: Executive Summary
EXECUTIVE SUMMARY Last year, our director nominees demonstrated to the stockholders of Morgans that the company was way off track Morgans’ share price was down 74% since IPO(1), significantly underperforming peers who were up ~20%(1) over the same period Poorly-timed and ill-fated deals damaged bran
Slide 7: Executive Summary (Cont'd)
EXECUTIVE SUMMARY (Cont’d) Since last year’s annual meeting, Morgans’ Board has delivered on all promises made: In just ten months, this Board has overseen improved earnings, the significant reduction of a previously perilous corporate expense structure, important steps toward the resolution of cost
Slide 8: Executive Summary (Cont'd)
EXECUTIVE SUMMARY (Cont’d) While Morgans’ turnaround is well underway, there still remains work to be done. Changing course now could put progress achieved to date at substantial risk Kerrisdale’s single strategy slate, which is based solely on selling the Company seemingly at any price, runs the en
Slide 9: Current Board's Strategy Remains the Most Logical Strategy
CURRENT BOARD’S STRATEGY REMAINS THE MOST LOGICAL STRATEGY
Slide 10: Promise #1 Delivered: Restructuring Legacy Balance Sheet
Morgans’ Current Board has Strengthened the Business PROMISE #1 DELIVERED: Restructuring Morgans’ Highly Leveraged Legacy Balance Sheet and Reducing Risk Profile In February 2014, Morgans refinanced the $180 million mortgage loan secured by Hudson New York and the $100 million corporate revolving cr
Slide 11: Restructured the Company's Perilously Leveraged Legacy Balance Sheet
Restructured the Company’s Perilously Leveraged Legacy Balance Sheet Prior to the Current Board’s Election: Debt and Preferred Equity Maturity Schedule Cash Balance as of 12/31/2012: (1) As of December 31, 2012 • $5.8MM $MM 250 192 198 200 150 97 100 50 50 0 0 (2) (2) 2014 2015 2016 2017 Thereafter
Slide 12: Promise #2 Delivered: Reducing Corporate Cost Structure
Morgans’ Current Board has Strengthened the Business (Cont’d) PROMISE #2 DELIVERED: Reducing Morgans’ Bloated Corporate Cost Structure A right-sizing of Morgans’ corporate organizational structure, resulting in annualized savings of approximately $10 million(1) Approximate 30% reduction in the Compa
Slide 13: Promise #3 Delivered: Asset-Light Brand Focused Strategy
Morgans’ Current Board has Strengthened the Business (Cont’d) PROMISE #3 DELIVERED: Better Execution of Asset-Light Brand Focused Strategy Protecting three at risk management contracts and their associated cash flows Continuing execution and oversight of agreements for seven new managed hotels as we
Slide 14: Promise #4 Delivered: Improved Accountability at Board Level
Morgans’ Current Board has Strengthened the Business (Cont’d) PROMISE #4 DELIVERED: Improved Accountability at the Board Level Realigned board compensation to reflect liquidity constraints at the Company in 2013 Dismissed the value destructive sale of Delano rd – As supported by 3 party lender appra
Slide 15: Promise #5 Delivered: Focusing on Details of Running the Company
Morgans’ Current Board has Strengthened the Business (Cont’d) PROMISE #5 DELIVERED: Delivered on All Promises While Focusing on the Details of Running the Company Developed new service standards and training programs resulting in higher service scores Enhanced Company’s website by streamlining the b
Slide 16: Positive Operating Momentum in All Aspects of the Business
Positive Operating Momentum in All Aspects of the Business During this transitional period, the full participation of each and every member of the current Board – along with their considerable industry, operational and capital markets expertise – was required to achieve these successful outcomes Own
Slide 17: Kerrisdale's Slate Is Misguided, Unqualified, Self-Interested
KERRISDALE’S SLATE IS MISGUIDED, UNQUALIFIED, SELF-INTERESTED AND IS NOT ALIGNED WITH STOCKHOLDERS
Slide 18: Kerrisdale's Short-Sighted Agenda Could Leave Substantial Value on the Table
Kerrisdale’s Short-Sighted Agenda Could Leave Substantial Value on the Table Company is in the midst of a primarily board driven turnaround – now is not the time for board change or a forced sale Underlying business is improving There is more work to be done and value to be created Kerrisdale’s publ
Slide 19: Kerrisdale is Misrepresenting the Facts
Kerrisdale is Misrepresenting the Facts (or Maybe It Does Not Understand the Facts) Kerrisdale’s Assertions The Facts The current Board is responsible The irresponsible actions of the prior Board directly led to the litigation with Yucaipa, and the current Board’s for exposure to costly litigation s
Slide 20: Kerrisdale Will Sell at Any Price, Even Below Current Trading Levels
Kerrisdale Will Sell at Any Price, Even Below Current Trading Levels Kerrisdale has made it clear that it would like to initiate a sales process of Morgans Hotel Group if its slate wins election. At the same time, it has publicly stated that it would be willing to take an offer in the $7.50 range, d
Slide 21: Kerrisdale's Slate is NOT Aligned with Stockholders
Kerrisdale’s Slate is NOT Aligned with Stockholders Morgans is not even one of Kerrisdale’s top ten investments, creating little incentive to fight for value and maximize price A Kerrisdale win is defined by executing the sale alone, not the price at which the sale is executed Kerrisdale’s nominees
Slide 22: Kerrisdale's Retention of a Yucaipa Affiliate is Likely Dangerous
Kerrisdale’s Announced Retention of a Yucaipa Affiliate is Likely Dangerous Kerrisdale’s slate’s admitted lack of operational expertise has forced it to secure the services of the Sydell Group to operate the business. Kerrisdale would pay for and outsource the management of an operationally intensiv
Slide 23: Kerrisdale's Nominees Lack Hotel and Public Company Experience
Kerrisdale’s Nominees: (1) Have Never Managed a Hotel Business (2) Have No Idea How to Value the Company (3) Have No Experience Running a Public Company Name Lack of Qualifications Sahm Adrangi* • No Lodging/Hospitality Experience • No Public Company Board Experience Andrew Broad • No Public Company
Slide 24: Current Board Is Aligned with Stockholders
CURRENT BOARD IS ALIGNED WITH STOCKHOLDERS
Slide 25: Morgans' Board is Acting in Stockholders' Best Interests
Morgans’ Board is Acting in Stockholders’ Best Interests As fiduciaries, Morgans’Board constantly explores opportunities to do what is right in the short and longer-term for stockholders, but at the right time and the right price The current Board takes its responsibilities seriously and will always
Slide 26: Two New Independent Directors with Significant Industry Experience
To Further Enhance our Board, We Have Nominated Two New Independent Directors with Significant Industry Experience Marty Edelman Paul Hastings; Of Counsel in the Real Estate practice Attorney with more than 30 years of experience in real estate and corporate mergers and acquisitions transactions Spe
Slide 27: Other Director Nominees: Industry and Financial Experts
Morgans’ Other Director Nominees are Comprised of Industry and Financial Experts Our Slate John Dougherty Former Vice President of Olshan Hotel Management 25+ years experience in real estate and hotel management Jason Taubman Kalisman Chairman and Interim CEO of Morgans Hotel Group Founder and CEO o
Slide 28: Conclusion
CONCLUSION
Slide 29: Conclusion
Conclusion Morgans’ Board has delivered on all promises it made to stockholders and is best equipped to continue the strong momentum it has generated and maximize value for all stockholders Today, Morgans is in a much stronger and more stable position than it was a year ago, both financially and ope
Slide 30: Morgans' Director Nominees Bios
MORGANS’ DIRECTOR NOMINEES BIOS
Slide 31: Morgans' Candidate Bios
Morgans’ Candidate Bios Relevant Lodging Proposed Board Member Experience Jason Taubman Kalisman Chairman of the Board Jason T. Kalisman, CFA, was appointed Chairman of our Board of Directors in June 2013. He also served as a member of our Corporate Governance and Nominating Committee from July 2011
Slide 32: Morgans' Candidate Bios
Morgans’ Candidate Bios Relevant Lodging Proposed Board Member Experience Jonathan Langer Jonathan Langer joined our Board of Directors in June 2013 and was until February 2014 a member of our Audit Committee and Corporate Governance and Nominating Committee. Since 2011, Mr. Langer has been a Partne
Slide 33: Morgans' Candidate Bios
Morgans’ Candidate Bios Relevant Lodging Proposed Board Member Experience Martin Edelman Marty Edelman is an attorney at Paul Hastings LLP with more than 30 years of experience in real estate and corporate mergers and acquisitions transactions. Mr. Edelman specializes in all stages of legal developm