Morgans Hotel Group Co (MHGC)

[Enterprising Investor]

MHGC Receives Unsolicitated Proposal (7/26/16)

The following language is hereby added as a new paragraph at the end of this section captioned “Special Factors – Background of the Merger”:

On July 18, 2016, the Company received an unsolicited written proposal from a party we refer to as Bidder V. The proposal proposed an acquisition of the Company’s common stock at an all cash purchase price of $2.75 per share, and stated that Bidder V anticipated redeeming the Company’s Series A preferred securities at their liquidation value plus accrued distributions and was committed to work to assume or refinance the Company’s mortgage debt. Bidder V stated that it intended to finance the acquisition entirely with equity, and enclosed a non-binding letter of intent from a financial institution expressing an agreement in principle to provide up to $250 million in equity financing to support Bidder V’s proposed transaction.

On July 19, 2016, the Board (excluding Bradford Nugent and Howard Lorber, who recused themselves) met to consider the proposal from Bidder V. After consulting with its legal and financial advisors, the Board determined that the Bidder V proposal would reasonably be expected to lead to a “Superior Monroe Proposal” within the meaning of the merger agreement, and that, consistent with its fiduciary duties, it should engage in discussions with Bidder V, subject to and in compliance with the requirements of the merger agreement. Later that day, Fried Frank furnished a form of non-disclosure agreement conforming to the requirements of the merger agreement to counsel to Bidder V. Fried Frank and counsel to Bidder V are in the process of finalizing a non-disclosure agreement.

Also on July 19, 2016, Bidder U requested a waiver from the Company of certain restrictions under its non-disclosure agreement for the purpose of engaging in discussions with the Board, Yucaipa and OTK Associates with respect to Bidder U’s proposal. On July 21, 2016, the Board (excluding Bradford Nugent and Howard Lorber, who recused themselves) met to consider the request from Bidder U. After consulting with its legal and financial advisors, the Board determined in accordance with the provisions of the merger agreement to grant Bidder U the requested waivers. Each of Yucaipa and OTK Associates is subject to agreements with SBE that limit the ability of such parties to engage in discussions with third parties, and the granting of waivers by the Board under the non-disclosure agreement with Bidder U is not intended to, and does not, affect the obligations of Yucaipa and OTK Associates under their agreements with SBE.

https://www.sec.gov/Archives/edgar/data/1342126/000119312516657386/d212820ddefa14a.htm