Orient-Express says Indian Hotel’s bid was way below its value

Exactly three weeks to the deadline date, Orient-Express Hotels has formally rejected Indian Hotel's $1.8-billion takeover bid, terming it “deeply unattractive from a financial perspective”. The US hotelier has also announced the appointment of a new Chief Executive Officer, clearly cementing its position in the US market, and further complicating Indian Hotels’ efforts to acquire the luxury hotel chain.

Tata Group-owned Indian Hotels, which bid around $1.86 billion on October 18 to acquire Bermuda-based Orient-Express Hotels, has been rebuffed for the third time. An earlier attempt was made in 2007.

Though couched in formal tones, Orient-Express has informed Indian Hotels of its decision in a letter, stating: “You continue to state publicly that you are offering a significant premium, but your opportunistic proposal was made at a time when the price of Orient-Express shares has been significantly depressed”.

Stating that now would be a highly disadvantageous time, the letter added: “The board believes the current macroeconomic environment, conditions in the luxury hotel business and factors unique to Orient Express would make this a highly disadvantageous time to sell the company to realise its true value”.

In its response, the Indian Hotels Company and Montezemolo and Partners, on behalf of the Charme II Fund, said they would be reviewing the position taken by the Orient-Express Board and consider their options with respect to their offer to acquire Orient-Express.

Indian Hotels and the fund, controlled by Italy’s Montezemolo and Partners, had made a joint bid to acquire Orient Express Hotels for $12.63 a share.

Strong rebuttal

Delivering its rebuttal, Orient-Express Chairman J. Robert Lovejoy said, “...our Board of Directors has unanimously concluded that your proposal significantly undervalues Orient-Express and its future prospects”.

He added, “...we believe the current price of Orient-Express shares reflects the market’s short-term outlook and not the long-term value of its assets”.

Stating that, “Orient-Express shares have been 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 CEO”, Lovejoy maintained, “...we strongly believe your proposal is significantly below the value of Orient-Express”.

Stating that “Orient-Express has exciting prospects and an unrivalled collection of one-of-a-kind luxury properties that it is taking concerted actions to optimise”, the Chairman added that the Board is of the opinion that the company is well positioned to deliver substantial value to shareholders in 2013 and the coming years.

New CEO

Using the opportunity to drive the wedge deeper, the Orient-Express Hotels also announced the appointment of John M. Scott III as President and Chief Executive Officer and a Director. The 47-year-old Scott was hailed as an experienced operator of luxury hotels who had most recently served as President and CEO of Rosewood Hotels and Resorts, where he oversaw a portfolio of 17 ultra-luxury hotels located in seven countries with combined revenues of more than $500 million.

In a statement, J. Robert Lovejoy, Chairman of the Board of Orient-Express said Scott has a “deep understanding of the ultra-luxury lodging sector” and is a “highly regarded leader in the global hotel industry”. He added that during Scott's tenure at Rosewood, he was responsible for doubling the number of hotels under management, significantly increasing EBITDA and securing an active development pipeline of new hotel projects.

On his appointment, Scott said in a statement, “Orient-Express is a legendary brand synonymous with excellence, sophistication and personality”, and that he looked forward to expand the business, grow profitability and significantly increase shareholder value.”

Chairman Lovejoy also thanked Philip Mengel for serving as interim CEO for the past six months, and added, “Having a seasoned leader at the helm provided us with the flexibility to conduct the thorough search that led us to John Scott.”

Deutsche Bank Securities and Goldman, Sachs and Company are acting as financial advisors to Orient-Express. Sard Verbinnen, a US-based strategic corporate and financial communications firm, sent out the note to Business Line on behalf of Orient-Express.

amritanair.ghaswalla@thehindu.co.in