New Delhi: Orient-Express Hotels Ltd rejected a $1.2 billion takeover offer from Indian Hotels Co Ltd as too cheap and appointed a new chief executive, saying that it was confident of its prospects as an independent company. The hotel and restaurant owner, whose properties include the Hotel Cipriani in Venice and the '21' Club in New York, has a history of rebuffing takeover approaches.
Its shares closed down 11 per cent at $10.55, taking to 16.5 per cent below the $12.63 offer price. "The Indian Hotels proposal ... is deeply unattractive from a financial perspective. 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 realize its true value," Orient-Express Chairman Robert Lovejoy said in a statement.
Indian Hotels, a unit of Tata Group that has interests ranging from steel to software, said it was considering its options after the rejection. Late last month, it asked to meet with Orient-Express and indicated it could raise its offer, if it had a chance to inspect the firm's books. The $12.63-per-share offer was at a 40 per cent premium to Orient-Express's previous price, and at a level last seen for the shares early last year. Orient-Express shares have fallen nearly 85 per cent from their all-time high of $65.36 in 2007.
"There is no question that the board is correct in that it is not a good time to sell the company," said an Orient-Express shareholder, who did not wish to be named. "But that doesn't mean that at the right price this wouldn't be the right time." The shareholder, who thinks Orient-Express could attract other buyers, said a right price for the company would be $15 per share or more. Orient-Express named John Scott as its chief executive, replacing interim CEO Philip Mengel. Scott was CEO of Rosewood Hotels & Resorts from 2003 until its sale in 2011 to Hong Kong-based New World Hospitality.
Indian Hotels, Orient-Express' second biggest shareholder, offered to form a strategic alliance with the US company in 2007 but was rebuffed. An offer from Dubai-based Jumeirah Group to buy Orient-Express that same year was turned down. Indian Hotels went public with its current offer last month after a proposal to buy a significant stake was rejected in August.
It has a 7 per cent holding in Orient-Express, behind Cohen & Steers Capital Management, an investment firm that is the largest shareholder with 13 per cent. Indian Hotels has proposed that a group managed by Luca Cordero di Montezemolo, chairman of Italian sports carmaker Ferrari and a close friend of Tata Group Chairman Ratan Tata, would invest $100 million for a minority stake in the newly combined company.
But Orient-Express - which has 45 properties in 22 countries, including hotels, tourist trains, restaurants and cruise ships - said it was better off as a standalone firm. The opportunity to grow earnings and cash flow is significant, and the company is well positioned to deliver substantial value to its shareholders in 2013 and beyond, Lovejoy wrote in his rejection letter to Indian Hotels. Indian Hotels has bought several overseas properties, including the Pierre in New York, but they have not tended to perform as well as its domestic operations, which include its flagship Taj Mahal Palace in Mumbai.
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