Ron Burkle, whose Yucaipa Companies holds $230 million in shares of the Morgans Hotel Group, demanded Tuesday that the company find a buyer after its CEO Michael Gross resigned.
The move was the latest criticism from Burkle since Chairman Jason Kalisman’s investment firm OTK Associates took control of Morgans. Gross stepped down Monday after not receiving a seat on the new board.
“Stop playing with the company as though it’s your new toy,” Burkle wrote in a letter to Kalisman, cited by Law360. Kalisman has taken over as interim CEO. “Get Morgans on the market and sell it to an appropriate buyer.”
Burkle, who lost his seat on Morgans’ board back in June, is seeing the dividend rate on his $100 million in preferred stock jump 4 percent without a spot on the board, and he says the penalty is costing Morgans’ shareholders $10,000 per day. Burkle also says that his observation rights, guaranteed by his debt position, are being ignored.
Morgans spokesman Dan Gagnier declined to comment to Law360.
Burkle and Morgans had a deal by last Easter that would remove Burkle’s holdings in the company in exchange for a Miami hotel and Las Vegas hospitality management company. But OTK, a 14.9-percent owner of Morgans, sued in Delaware to block the deal and launched moves to replace the board.
OTK reportedly has a history of tension with Burkle and other Morgans directors.
When a judge blocked the deal in April, the company dialed back and said it was open to other bidders, confirming that a $7.50-per-share takeover offer had been on the table. But then OTK swept board elections, after which Burkle sued the company for $10 million in breakup fees and other expenses. He is also seeking new board elections. [Law360] — Julie Strickland