D.E. Shaw Takes Largest Stake in Orient-Express Hotels

Posted by: Charles DuBow on February 13

Luxury travel company Orient-Express Hotels (OEH) has a new largest shareholder—and the current management may not be too pleased. According to Jon Ogg blogging on AOL, an SEC filing has disclosed that Manhattan-based activist shareholder D.E. Shaw has acquired 2,431,218 shares in the company, which is 5.7% of total shares outstanding. As Ogg writes the purpose behind the acquisition is to “bolster shares and make changes at the company.”

As I blogged about on Jan. 2, "OEH has been trading at the richest multiple of any publicly traded lodging company with a P/E of 53 and an EV/EBIDTA of over 20 (comparable companies are trading at P/Es of 20x and EV/EBIDTA of about 10x."

The reason is that investors are sniffing a buy-out of the company. But there are also concerns that OEH's existing governance structure could scare off potential suitors. Currently, the rights of the holders of its Super Voting Class B shares allow them to overrule the Class A shareholders. D.E. Shaw wants to change that. In their filing, Shaw writes that it wants to and allow Class A shareholders to "hold a definitive and binding vote regarding a merger or sale of the company should a proposal be made."

Of course, everyone knows it's no mean feat to overthrow Super Voting Class B shares, even it is in the best interest of the majority of shareholders. (Just look at the ongoing struggle at the New York Times Co.) But if Shaw were able to pressure OEH's management, it could result in the pay-day that so many of its shareholders have been awaiting for so long.

OEH's portfolio includes more than 50 properties in 25 countries, including luxury trains (the eponymous Venice-Simplon Orient-Express), restaurants, safaris and condominiums. In 2000, the company went public and, according to the company's web site, for 2006, which was the last year for which figures are available, it had net earnings of $39.8 million on revenue of $510.5 million.

OEH's stock was up 3.52% to 52.64 in midday trading.