Morgans Hotel — Proxy Contest (May 2013)
50 slides from Morgans Hotel's proxy contest presentation, May 31, 2013
Slide 1: Schedule 14A Proxy Statement Information
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 and previous filing 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: Company issued a presentation to investors
On May 31, 2013, Morgans Hotel Group Co. (the “Company”) issued a presentation to investors. A copy of the presentation is set forth below.
Slide 4: Committed to Delivering Shareholder Value
MORGANS HOTEL COMMITTED TO DELIVERING GROUP CO. SHAREHOLDER VALUE May 2013
Slide 5: Forward-Looking Statements
Forward This operating “expect,” reflect changes from conditions, debt “boutique” brands for documents to at status consummated. information 2results aconsummate the properly or presentation those of our or fiscal and make in the Looking events “endeavor,” performance current circumstances expressed
Slide 6: Table of Contents
Table Chapter I. II. Clearly Successful III. Independent Proposed IV. OTK V. Significant 3Our Executive Morgans’ Clear OTK Steps Board Associates’ Associates lacks ofdefined Title Contents and Associates’ Taken Deleveraging of execution aexperience Summary Slate and Demonstrated credible Page Direct
Slide 7: Executive Summary
Executive Morgans’ Company The OTK employees, By 4restructure initiating Company proposed Associates, has failed Board to Summary the and explore aDeleveraging recently proxy balance to family and LLC provide all its fight (“OTK”) sheet friends, explored management alternatives with a Transaction cr
Slide 8: II. Clear and Demonstrated Path to Grow Value
5II. Clear and Demonstrated Path to Grow Value
Slide 9: Company Overview
Company 12 833,200 72,800 Recently Delano Mondrian 6Conversion Signed cities countries Highly secured rooms additional Moscow Agreements Signed Overview Bahamas London Recognized under of THEhotel rooms Contracts long-term and(5Branded Hudson under at Include Mandalay management construction) London
Slide 10: Clearly Defined Strategy
Clearly In Expand Invest 7Divest 2011,in real Defined our under ourestate brand product infrastructure the Strategy assets and direction and management toservice fund and andorganization our supervision offerings expansion business toto of globally enhance and create the to Board, improve ain operat
Slide 11: Implementation of Articulated Strategy
Implementation Articulated Globally Robust Highly High-return Clear 8Through path scalable pipeline our recognized tostrategy economic operational strong infrastructure composed of Strategy focused cash boutique model scalability, flow ofon focused newly providing lifestyle growth building improving
Slide 12: Locations – Growing Global Platform
9Locations – Growing Global Platform
Slide 13: Successful Execution of Strategy
Successful Expand Invest Divest Signed Developed Successfully Added Sold 10 Mondrian to real operational 8our enhance create management Execution robust estate brand completed Los a scalable to operating pipeline and infrastructure Angeles, fund to management agreements the Date expansion management
Slide 14: Morgans' One-of-a-Kind Brands
Result-segmentation Morgans’ One-of-a-Kind DELANO Lifestyle MONDRIAN Urban HUDSON Distinctive ORIGINALS Brand Allows Complementary Management’s 11 Gateway Globally Morgans Brand…stimulating portfolio collection strategic Exclusive Brand…cutting-edge offerings Recognized to of access has of well-know
Slide 15: New Hotels Projected Pipeline
NewWe Projected Pipeline Hotels Delano Hudson Originals Total Mondrian (1) opportunities Hotels 3 Today 12820 2014 have 32 Las Moscow Cesme London 1by 236Openings 1London Doha Bahamas 3Istanbul 50Brand Vegas(1) 24Under a2015 Hudson 6with Signed 7licensing xxxxDelano 2016 xMGM Delano xDevelopment Ove
Slide 16: Robust Pipeline
Robust recognizable Highly 13 Pipeline brands well-suited to global urban gateway markets and luxury resort destinations
Slide 17: Highly Scalable Platform
Highly Fully-revamped Upgraded Through Scalable Core First Design, & Marketing Platform Special 14 Beverage Class Expertise Scalable scalable Events New Infrastructure the Systems senior and Food Technology above Senior Operations ininfrastructure, marketing, Infrastructure State operations Leadersh
Slide 18: Creating Long-Term Shareholder Value
4Creating Current ?Long-Term Limited Value Historical Target High Incremental Management 15Base Incentive License newIncremental contracts aSigning fees infrastructure Capital 3-4 Shareholder fees fees fees and Contracts: cash year Presentation on per of chain signed Investment payback flow selected
Slide 19: Current Financial Results Demonstrate Positive Traction
Current Strong RevPAR Improved Hotel At High-Single-Digit Gross Productivity Labor Total Despite 16 ourcorporate all operating hotels, fees productivity non-comparable Top-Line Financial increased atMargins from our and gross system-wide expenses margins third-parties Growth Expenses Results revenue
Slide 20: Clear Path to Significant Management Fee Growth
Clear $70 Signed $40 $50 $30 Gross Twelve $- $10 Current In The An A Ramp 17 10x bidding October 8x Signed Gaylord Path Management Fees: up multiple LOIs Months Comparable inwar to 2012, Agreements gross $50-60 $20 acquisition Significant between paid Ended mm Marriott fees mm Fee for Industry Curre
Slide 21: Significant Value in Two Remaining Owned Assets
Significant Delano Property Hudson Rooms: 2012 2012A Peak 18 EBITDA: RevPAR: EBITDA: South 194 866 Information: Value Beach $334 $175 $22.0mm $43.0mm $13.8mm $11.0mm in Two Remaining Owned Assets
Slide 22: Clear Path to Value Maximization
Clear We Continue Strengthened Bolstered Monetized ??Restructure Earlier OTK 19 Have has and this taken to Made Articulated our real year, expand the operational our estate all Significant we attractiveness balance efforts our entered to Path global focus to infrastructure sheet to Progress stop int
Slide 23: III. Steps Taken to Address Complicated Risk Profile
III. Steps Taken to Address Complicated Risk Profile 20
Slide 24: Complicated Risk Profile
Complicated Our Over-Levered Limits Restricts Corporate Through Additional circumstances Management Morgans’ 21 Board shareholders’ its flexibility current Governance is Equity ownership Risk Focused business Balance Board Capital Profile toparticipation finance on development in Sheet Restrictions
Slide 25: Board Focused on Enhancing Shareholder Value
Board A Transaction On 180 Several Preliminary Greenhill The governance 22special the potential special implied Focused recommendation preliminary transaction &transaction issues and offers Co. valuation investors on other rendered Enhancing received offers committee value-maximizing of were committ
Slide 26: Benefits of Proposed Deleveraging Transaction
Benefits Through $88 All Morgans’ Significantly Eliminate Yucaipa Would OTK 23 preferred million seeks eliminate significantly would of the obligations Dilutive Proposed to of proposed Reduce improves stock stop convertible surrender Yucaipa’s Warrants this and increase Deleveraging Debt under Delev
Slide 27: Benefits of Deleveraging Transaction and Rights Offering
Benefits Secure As Rights The Each Yucaipa We Backstop OTK 24 part would proposed right has Offering Long-Term of has of not unlikely the use would Proposed agreed identified proposed Deleveraging approximately tocarry to Raise Management tobe Deleveraging fully aany Deleveraging significantly Capit
Slide 28: Impact on Balance Sheet
Impact We Balance $400 $500 $557 $(in eV -1Debt $100 Convertible OTK (1) 25 Q-13 $300 alu 2014 Potential Includes currently Deleveraging $200 millions) has Pro of ofSheet no proposed Proposed Forma Impact Notes the real lack Transformation $322 Light and Debt financial Trust Transaction Deleveraging
Slide 29: Analyst Reactions to Proposed Transaction
Our “…Perhaps ago, ??“We and “MHGC’s the -“In Analyst (1) 26JMP Credit Sidoti, MKM Permission shares the served Analysis the Securities, are proposed Suisse, Partners, Reactions community company April more constructive proposed its most ispurpose 30, to April Supported appealing Yucaipa importantly
Slide 30: IV. OTK Associates' Director Nominees Not Aligned with Shareholder Interests
IV. OTK Associates’ Director Nominees Not Aligned with Shareholder Interests 27
Slide 31: Status Update on OTK Proxy Contest
Status shareholders OTK In Board Morgans’ Deleveraging 28 fact, has is Update Yucaipa currently launched not taken Board put Transaction unilateral proposed and forth reviewing a management proxy an action alternative oncontest May thistoproposal 16, team stop incredible an 2013 the have attempt OTK
Slide 32: OTK Lacks a Credible Plan
OTKOTK Luxury The OTK’s Existing Obligations Convertible Less: Preferred Additional Delano Mondrian Hudson Cash Trust Working 29 Deficit($51.0)($71.3) attempt sale Preferred Available Generated Lacks Preferred “Plan” Marrakech—CF Moscow hotel London—Equity/Key Increased of Capital(20.0)(20.0) Stock
Slide 33: OTK's Own Track Record Undermines Its Credibility
OTK’s In committee OTK in Jason 30 our March was voted Taubman view, Own own 2013, offered asked to track that Track allow Kalisman, Kalisman before Yucaipa him record the Record the opportunity urgently the original of could supported proposed OTK’s Undermines voting to become deal describe to curr
Slide 34: OTK's Track Record Undermines Its Credibility (cont.)
The hedge OTK transaction OTK’s 31 voted entered Ownfund and at its inTrack Morgans afavor Nominees’ value owned Record ofbelow 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 proposal stated prop
Slide 35: OTK's Slate of Conflicted Family, Employees and Friends
OTK’s Turning Five Two One In 32 fact, is are ofaan Slate there the control young hedge employee seven is is afund Olshan not Taubman of Conflicted hand-picked the one of owner Board an family person family Olshan where Group over members OTK onmember family OTK’s the toofnominees OTK’s Taubmans Fam
Slide 36: OTK's Slate Conflicted (cont.)
OTK’s Michael public Andrea company Jason OTK; John Dougherty the 33 vice Dougherty, Taubman however, company Slate Olshan, president Olshan, experience. has is several aKalisman, in age experience Conflicted age of reality 33, hotels 62, 30, Her other ishas ishe only the age the for Group affiliati
Slide 37: OTK's Slate Conflicted (cont.)
OTK’s Parag Vora According Jonathan Mr. Langer’s The August million 34 Vora Langer Taubman Whitehall funds Vora, Slate in 2008. has sole Langer, 2009. to from has age is direct OTK’s American public family Street abusiness 37, Mr. 2009 Conflicted age business isLanger company proxy Real is 43, the t
Slide 38: OTK's Slate Conflicted (cont.)
Mahmood Highgate In companies OTK’s 35 addition Slate slate previously Khimji, –toof American isbeing nominees a Conflicted age amade shareholder, 52, Casino are aisGroup proposal not the &independent co-founder Entertainment investor of to Family, takeand and over Family director Properties princip
Slide 39: OTK's Slate Conflicted (cont.)
Mr. Langer Jason Michael OTK’s 36 Khimji Taubman Slate director slate Olshan, has of is nominees anominees sat Kalisman’s Andrea Conflicted on several twoOlshan, lack also public only Group public relevant have public John company of limited company Family, Dougherty experience company boards, publi
Slide 40: OTK Associates ownership structure
50% Owned Robert William GTK Jonathan Beneficiary At 13.9% OTKGSowned Associates 2008 until holder Taubman by: Taubman Langer T-OTK 2009 byofT-OTK MHGC LLC 43TRUST
Slide 41: OTK's Proposed Slate relationships
OTK’s Jason Andrea Michael OTK Jonathan Mahmood Parag John Business Dougherty Associates Kalisman Vora Proposed Olshan Olshan Langer Relations Khimji 37 33 34 30 62 LLC 43 Slate: 52 Personal Family Taubman Family Relations Relations and Family Friends Olshan Family
Slide 42: OTK Wants to Take Control Without Paying a Premium
By nominating achieve Mr. representative OTK 39 Kalisman Wants is attempting hasitsrebuffed own tolater to Take aobjectives the slate Morgans’ to proposed Control Board, take of seven control without but of attempts that Morgans… directors, was he of appropriately not would the at willing reasonable
Slide 43: V. Morgans' Slate of Qualified Directors
V. Morgans’ Slate of Qualified Directors 40
Slide 44: Morgans' Slate Will Remain Focused on Maximizing Value
Morgans’ We nominee Our The 41 offered are Board director Corporate slate receptive nominating consents is Slate will to comprised nominees re-nominate Governance of continue toQualified tosix shareholder serve of are directors tosix focused with Mr. explore and Directors nominees, Kalisman our Nomi
Slide 45: Morgans' Slate of Qualified Directors
Morgans’ We Each Except Our investing Morgan’s 42 believe directors offor the and Slate board our our Board’s have real CEO, director of is estate, Qualified experienced, asix deep all director nominees are with understanding independent Directors each has nominees have director the the requisite di
Slide 46: Director Biographies
Michael Director Ron Robert Jeffrey Brings Age ??Our Under strengthen Prior B.S. ??Managing Companies, 57 and 67 focused development ?management Expertise Experienced Public Experience Extensive Management 43 MBA More Licensed ?marketing Burkle Numerous Currently from research CEO Mr. company to Fri
Slide 47: Director Biographies (cont.)
Director Thomas division of Chapter Michael ?Nationstar investment leisure Our Management 44Previously Managing Retired marketing slate and of Harrison Age Malone Biographies from comprises Mortgage the Omnicom the banking, Director served communication Experience Presentation U.S. Bank financial 59
Slide 48: Committed to Strong Corporate Governance
Committed Annual We The Termination Board Transaction All Our Andrew Another 45 of strongly Board Corporate CEO our composition election say-on-pay Sasson, Board is current 2013 recently has ofto not encourage ofDirectors Strong Governance also the member director the of the directors poison directo
Slide 49: Important Additional Information
Important On strongly with 46 May the SEC advised 23, Additional 2013, from tothe the read Information Company SEC’s the Company’s website filed aatdefinitive 2013 www.sec.gov proxyproxy statement orstatement the Company’s because and WHITE it contains websiteproxy atimportant www.morganshotelgroup.
Slide 50: 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