Indian Hotels Company has yet again made an offer, jointly with an Italian fund, to buy the luxury hotel chain Orient-Express Hotels Ltd, at an estimated $1.86 billion, including Orient-Express’ net debt.
The Tata group company and Charme II Fund, an Italian fund, have jointly written to Orient-Express Hotels to buy all the outstanding shares at $12.63 a share in cash, Indian Hotels said in a late evening press release.
Indian Hotels has been a shareholder of Orient-Express for over five years and now holds about 7 per cent of Orient-Express’ Class A stock. It had earlier made an offer for an alliance with the luxury hotel chain, which Orient-Express had rebuffed. In December 2007, Orient-Express told Indian Hotels that it did not believe there was a strategic fit between Indian Hotels and its own global portfolio of luxury hotels and travel experiences.
It had even said that any association of its luxury brands with the Taj’s brands and properties would result in a reduction in value of its brands and businesses.
Indian Hotels had acquired close to 11 per cent stake in Orient-Express for almost Rs 1,300 crore.
In the press release, Indian Hotels said that the all-cash offer represented a 40 per cent premium to Orient-Express’ closing stock price on October 17, the last trading day prior to this announcement; a 45.2 per cent premium to Orient-Express’ 10-day trading average of closing stock prices; and a premium to the 52-week closing high of $ 10.90 a share.
The Hamilton, Bermuda-headquartered Orient-Express Hotels has a chain of 45 hotels, cruise and luxury rail businesses in 22 countries.
Indian Hotels, the release said, had tied up the funds to complete the deal, including debt from Bank of America, ICICI Bank and Standard Chartered Bank.
Italian fund
It also had an agreement in place with Charme II Fund to invest $100 million for a minority stake in the combined company.
Charme II Fund is managed by Montezemolo and Partners S.p.A, which was founded by Luca Cordero di Montezemolo, Chairman of Ferrari. It invests in leading companies with strong ties to Italy. The fund was established by the Montezemolo family. Indian Hotels has assured Orient-Express that it will maintain the identity of the luxury hotel chain.
“Orient-Express would remain an independent and autonomous company with its own board of directors,” the release said.
The release quoted R.K. Krishna Kumar, Vice-Chairman, Indian Hotels, as saying that the offer represents a “compelling and immediate value proposition for Orient-Express’ shareholders and provides Orient-Express with access to the additional capital necessary to preserve its properties and heritage while potentially expanding its footprint.” He hoped for a prompt reply from Orient-Express to the offer.
The release said Indian Hotels had entered into an agreement with James Sherwood, former chairman and founder of Orient-Express, under which Sherwood had agreed to eliminate certain rights he would otherwise have to acquire the Cipriani Hotel and related assets in the event of an acquisition of Orient Express by Indian Hotels.