Investors in Morgans Hotel Group are considering forming a shareholder action group after the board of the luxury hotel group rejected a $1.4b (£796m) bid from a Dubai-based investment fund.
Morgans chairman David Hamamoto wrote to Zabeel Investments last week to notify the sovereign wealth fund that its indicative offer of $22 a share for the Nasdaq-listed company had been unanimously rejected by the board, The Times reports.
Zabeel is believed to be flummoxed by the board’s reaction given that Morgans’ shares were trading at about $10 at the end of July.
One shareholder said: “I’m furious about this. The only way such a rejection would be justified would be if there was a higher offer on the table from another party.”
An American hedge fund with a significant holding added: “We’re going to talk to other investors about setting up an activist group. Unless the board have another offer or something else up their sleeves, I can’t see shareholders letting them get away with this.”
Morgans is understood to believe its expansion plans will deliver much greater long-term value to shareholders than Zabeel’s bid, despite the deteriorating economic picture.
Zabeel is believed to remain interested in the company, but is said to be unwilling to stage a hostile takeover. Its $22-a-share offer values Morgans at $684 million, or just over $1.4 billion including debt.
Morgans was founded by Ian Schrager and runs ten style-led hotels, including the Clift in San Francisco, the Royalton in New York, the Delano in Miami and the Sanderson and St Martins Lane hotels in London.
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By Gemma Sharkey
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