Orient-Express Hotels Ltd. (OEH:US), owner of New York’s 21 Club restaurant and the Hotel Cipriani in Venice, Italy, rejected a takeover offer by Indian Hotels Co. (IH), saying the bid undervalues the company.
“Your opportunistic proposal was made at a time when the price of Orient-Express shares has been significantly depressed,” the Hamilton, Bermuda-based company said in a letter to Indian Hotels. “Our board has unanimously concluded that your proposal significantly undervalues Orient-Express, and that now would be a highly disadvantageous time to sell.”
Indian Hotels, in collaboration with other entities associated with Mumbai-based Tata Group, last month offered to buy the 93.1 percent of Orient-Express it doesn’t already own for $12.63 a share. The unsolicited bid was 43 percent higher than Orient-Express’s 20-day average price, a record premium for the industry, according to data compiled by Bloomberg.
“The board is deeply committed to creating value for our shareholders and will take whatever actions it believes will best accomplish that objective,” J. Robert Lovejoy, chairman of Orient-Express, said in a statement. “We carefully evaluated the Indian Hotels proposal in that spirit but unanimously concluded it is deeply unattractive from a financial perspective.”
The economy, “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,” he said.
As part of the transaction, Montezemolo & Partners, a family-owned Italian fund, would invest $100 million for a minority stake in Orient-Express through its Charme II Fund, Indian Hotels said last month.
The partners “are reviewing the position taken by the Orient-Express board and considering their options with respect to their offer to acquire Orient-Express,” Indian Hotels said in a statement today.
Orient-Express fell 11 percent to $10.55 at the close of trading in New York, the most since August 2011.
The company owns and operates luxury hotels, trains and restaurants worldwide including the Copacabana Palace in Rio de Janeiro and the Venice Simplon-Orient Express train. The company’s shares, which peaked at $64.80 in October 2007 before the global financial crisis, have since plunged more than 80 percent.
“What hurt Orient-Express in the last few years was the economy and too much debt,” Chris Agnew, a Stamford, Connecticut-based analyst at MKM Partners LLC with a buy rating on the stock, said in an interview. “That has held them back in accelerating some of their investments to help maximize returns.”
Indian Hotels -- the country’s biggest hotel operator, with properties including the Taj Mahal Palace in Mumbai and the Pierre Hotel in New York -- has held a portion of Orient-Express since 2007, when it paid $211.3 million for a stake in the company. Soon after the purchase, Orient-Express rejected an attempt by Indian Hotels to pursue strategic discussions.
In April, Indian Hotels restarted efforts to increase its stake in Orient-Express, two people with knowledge of the matter said at the time.
“We know from the past that their returns on assets had been much higher than what they are today,” Agnew said. “If you believe they can get back to those returns, and obviously Orient-Express does, the stock should be worth more than the offer.”
Orient-Express also said today that it named John M. Scott III, 47, president, chief executive officer and a director. He most recently served as president and CEO of luxury hotel chain Rosewood Hotels & Resorts.
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