• Morgans' Board Slate 100% Committed to Promptly Initiating a Sales Process for the Company Upon Re-Election at the Company's 2013 Annual Shareholder Meeting
  • OTK Dissident Slate Offers Only a Vague Plan that Does Not Address Balance Sheet Challenges or Significant Consent Rights of Yucaipa
  • Yucaipa Announces Support for the Company Board Slate and a Sales Process and States It Will Not Bid for the Company

Morgans Hotel Group Co. (NASDAQ: MHGC) ("Morgans" or the "Company") yesterday held a webcast for shareholders to discuss the commitment of the Company's board slate to promptly initiate a process to sell the Company upon reelection at the Company's 2013 annual shareholder meeting on June 14th.

This announcement presents shareholders entitled to vote at the annual meeting with a clear choice:

  • Elect Morgans' slate, which currently provides for proportional representation of OTK Associates LLC ("OTK"), to immediately begin a sales process designed to maximize value for shareholders; or
  • Elect the Taubman and Olshan family-controlled OTK slate, which offers a vague plan that does not address the Company's balance sheet challenges or significant consent rights and which would result in significant uncertainty and a stalemate with the Company's largest creditor, The Yucaipa Companies ("Yucaipa").

Earlier in the week,Yucaipaannounced in an SEC filing its support for the Company's board slate and a sale of the company, which would allow the Company to proceed in running a sales process quickly and efficiently.Yucaipacontinues to hold significant consent rights over a sale of the Company's business or substantially all of its assets under certain circumstances and has already publicly declared that it does not believe OTK is qualified to run a sales process with respect to the Company.Yucaipaalso stated in the filing that it will not bid for the Company in any sales process.

Mike Malone, a director of Morgans, said: "As the other Morgans nominees have unanimously stated, I believe that selling the Company is the right thing to do based on recent events and also given the current potential to maximize shareholder value. In light of important feedback we have received from shareholders and the strong and significant interest from potential strategic buyers in acquiring the Company in recent days, we believe the time is right to initiate a formal sales process for the business, provided that Morgans' slate is elected."

In April, the Company announced a proposed deleveraging transaction to significantly reduce debt, address looming maturities, raise capital for growth and eliminate obstacles to maximizing shareholder value.

However, given the litigation initiated by OTK, there is now substantial uncertainty about the proposed deleveraging transaction.Yucaipahas stated publicly that the litigation with OTK will prevent any reasonable deal from closing, including the oneYucaipaexecuted with the Company in April.

"Shareholders voting at the Company's annual meeting now face a clear choice between a full sales process and a stalemate," saidMichael Gross, CEO of Morgans. "We believe the election of our Board slate and a sale for the Company is the best path to maximize value for all shareholders and we urge shareholders to vote the WHITE proxy card for all of the Company's nominees."

Shareholders should be aware that a vote cast on OTK's gold proxy card does not vote for any of the Company's nominees, even if shareholders only vote for three of OTK's nominees and withhold from the remaining OTK nominees. If shareholders want to ensure that their vote does not inadvertently turn full control of the board over to OTK, they should cast their vote for all available nominees on Morgans' WHITE proxy card. For assistance in casting your vote for Morgans' director nominees, please call Richard H. Grubaughof D.F. King& Co., Inc., at (212) 493-6950begin_of_the_skype_highlighting(212) 493-6950FREE end_of_the_skype_highlightingor email him at [email protected].

A replay of the Company'sJune 6webcast for shareholders is available on the Company's website untilJune 14, 2013at10:00 AM Eastern timeand can be accessed through the following link: http://phx.corporate-ir.net/phoenix.zhtml?c=194863&p=irol-IRHome

Morgans Hotel Group Co. (NASDAQ: MHGC) is widely credited as the creator of the first "boutique" hotel and a continuing leader of the hotel industry's boutique sector. Morgans Hotel Group operates Delano in South Beach, Mondrian in Los Angeles, New York, South Beach and London, Hudson in New York, Morgans and Royalton in New York, Clift in San Francisco, Shore Club in South Beach and Sanderson and St Martins Lane in London. Morgans Hotel Group has ownership interests or owns several of these hotels. Morgans Hotel Group also licenses a Delano in Las Vegas. Morgans Hotel Group has other hotels in various stages of development to be operated under management or franchise agreement, including a Mondrian property in Doha, Qatar and a Morgans Original in Istanbul, Turkey. Morgans Hotel Group also owns a 90% controlling interest in The Light Group, a leading lifestyle food and beverage company. For more information please visit www.morganshotelgroup.com.