Building up to a hostile bid?

Building up to a hostile bid?

The Morgans Hotel Group has rejected a $1.4bn offer from Dubai-based Zabeel. With investors angry, is it setting the stage for conflict?

September 10, 2008 10:22 by kippreport

Investors in the US-based Morgans Hotel Group are not very happy. The company, which runs chic hotels across the world, has just rejected a $1.4bn bid from Dubai-based Zabeel Investments, reports Times Online. The Morgans chairman, David Hamamoto, reportedly told the sovereign wealth fund that its indicative offer of $22 a share for the Nasdaq-listed company had been unanimously rejected by the board.

With Morgans shares currently trading at about $16 per share, analysts expect their value to remain near the $20 range, and so Zabeel’s offer was considered a good deal. Many of the investors that the Times spoke to seem infuriated, and are planning to form a shareholder action group against the company.

Morgans, which recently announced plans to start a Delano hotel in the Dubai Waterfront, is expecting to further expand across the world.

Zabeel is believed to remain interested in the company, but is said to be unwilling to stage a hostile takeover. But with investors rallying against the company, will it finally lead to that?
(A hostile takeover bid is one that is made despite opposition expressed by the directors of the company being taken over. It usually happens when there is a conflict of interest between shareholders and directors.)

Earlier, there were also reports that Abu Dhabi- based Mubadala was competing with Zabeel to acquire the Morgans Hotel Group. While the company has said this speculation was mere rumour, it remains to be seen whether they will now make use of the situation to offer a juicier bid.