Burkle demands Morgans sale after CEO resigns

It's the latest strike since the company's largest shareholder led an ouster of the board in June
September 05, 2013 12:00PM

From left: Ron Burkle and former Morgans CEO Michael Gross

From the New York site: Billionaire Ron Burkle, whose Yucaipa Companies holds $230 million of shares in the Morgans Hotel Group, demanded its board sell the boutique-lodging company after Chief Executive Officer Michael Gross resigned.

“Get Morgans on the market and sell it to an appropriate buyer,” Burkle wrote in a letter to Chairman Jason Kalisman, who took over as interim chief after Gross’s departure. “It’s time to sell now for all stockholders’ benefit.”

Morgans announced the change in leadership yesterday after its largest shareholder, OTK Associates LLC, led an ouster of the board in June. OTK, founded by Kalisman, owns about 14 percent of the New York-based hotelier’s shares.

The company, which operates properties including the Mondrian in Los Angeles and the Delano in Miami’s South Beach, has lost money each quarter since 2007, according to data compiled by Bloomberg.

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