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Morgans hotels' bid rejection angers shareholders

10 September 2008 by

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.

Niels Sherry to join De Vere Deluxe from Morgans >>
Morgans Hotel Group sells 50% stake in its London properties >>

Morgans Hotel Group to build its first residences in Miami >>

By Gemma Sharkey

E-mail your comments to Gemma Sharkey here.

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