Snubbed Tatas say options open on Orient-Express

The Bermuda-based hotel chain's stock reacted negatively to the rejected bid and closed 11.3% down offer ?deeply unattractive', says board

A day after the Orient-Express board rejected its bid, terming it “opportunistic”, Indian Hotels Company (IHC) gave a rather restrained response, saying it was “reviewing” the position taken by the Bermuda-based firm and was “considering options”.

IHC is part of the Tata Group, owning and manages the Taj chain of luxury hotels.

Orient-Express had stated yesterday the offer of $12.63 a share by IHC was deeply unattractive and undervalued the company and its prospects. The Orient-Express stock reacted negatively to this outcome and closed 11.3 per cent down at $10.55 against its previous close.

This is the second time Orient has spurned the offer from Indian Hotels. In 2007, it had battled a similar takeover attempt by the Tatas even when the share price of the company was more than four times what it is today.

Orient stated it was negatively impacted by various factors including economic turbulence, particularly in Europe, important properties in the midst of refurbishment projects, and the transition to a new chief executive, depressing the share value.

A report in The New York Timest seemed to have endorsed that view, stating the Four Season Hotel in Manhattan drew a takeover offer of $2.4 million a room, while Indian Hotels’ offer valued Orien- Express at less than $700,000 per room. British bank company Barclays had put the asset value of Orient Express at $18 a share in a report published late last month, 43 per cent more than the offer made by IHC.

Though Indian Hotels decided against an exit despite a 70 per cent erosion in the value of their holding in Orient over the past five years, it is expected this time to pursue its takeover ambitions much more aggressively.

IHC has already spoken separately to the current investors of Orient-Express and brought in consultants and legal and financial advisors for the proposed deal.

Bank of America Merrill Lynch is serving as sole financial advisor, Shearman & Sterling LLP as legal advisor and Hotel Advisor (UK) is providing industry expertise for the proposed transaction.

The company, in a letter late last month, had also indicated the buyout offer, which was at a 40 per cent premium to the Orient-Express stock, was based on public information and the ‘limited data’ available to it.

The Indian company also hinted at an improved offer, urging the Orient management to engage in an organised dialogue process with Tata Group chairman Ratan Tata and Ferrari chairman Luca Cordero di Montezemolo.

“To the extent you and your advisors wish to discuss value-drivers of which we may not be aware, we would be pleased to engage in a constructive dialogue regarding these issues”, IHC vice-chairman R K Krishna Kumar had stated.