Potential Morgans Hotel Group (MHGC) Sale Raises Questions From Major Investor

NEW YORK ( TheDeal) -- As Morgans Hotel Group  (MHGC) deals with media reports of a possible deal for the company, a shareholder on Monday, Aug. 17, questioned whether the New York hotelier's board would get fair value in a deal.

"We are deeply concerned that the potential transaction would substantially undervalue the company and any breakup fee or other limitation on the company's ability to pursue strategic alternatives will further risk shareholder value," wrote Gregory Cohen, CEO of Rambleside Holdings, a New York-based real estate company that characterized itself as one of Morgans Hotel's largest shareholders.

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The letter comes in reaction to an Aug. 6 report in The Wall Street Journal that the owner of the Delano and Mondrian hotel brands was in talks with Sam Nazarian's SBE Entertainment Group about a potential merger. 

Morgans has been on the block since May 2014 when the company hired Morgan Stanley to assist in evaluating strategic alternatives, including a potential sale. 

Rambleside, however, said it thinks the company can do a better job marketing itself to potential suitors.

The firm, which did not reveal how big a stake it held in Morgans, called on the board of the company to engage in "a widely marketed sale process" and potenially merge the hotel management company "with a world class hotel and brand manager."

Morgans said in response to a query Monday that it does not comment on rumors or speculation. SBE and Rambleside did not respond to calls seeking comment.

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