New Delhi: Shares of Indian Hotels Co. Ltd (IHCL) were up almost 2.7% at Rs.65 on BSE at 10.30am on a day when the exchange’s benchmark index Sensex was almost flat after the board of Orient-Express Hotels Ltd rejected a takeover offer—the second in five years—from the Tata group company that runs the Taj chain of hotels.
Orient-Express said the bid is not in its best interests and undervalues the company.
“Your opportunistic proposal was made at a time when the price of Orient-Express shares has been significantly depressed,” the company said in a letter to IHCL. “Our board has unanimously concluded that your proposal significantly undervalues Orient-Express, and that now would be a highly disadvantageous time to sell.”
“We will take (a) call after discussing with the board. We were waiting for their offer,’’ said a senior IHCL executive, requesting anonymity. IHCL spokesperson Rakhi Lalwani said she could not offer any comment immediately.
On 18 October, IHCL said it is making a new bid to gain control of Orient-Express after being rebuffed five years ago. IHCL, which hold 6.9% stake in the Hamilton, Bermuda-based hotel owner, offered to purchase the rest of the company’s publicly traded Class A shares for $12.63 each. The unsolicited bid was 43% higher than Orient-Express’s 20-day average price.
IHCL made the bid along with Charme II Fund, an Italian fund managed by Montezemolo and Partners SpA . The proposal is valued at approximately $1.86 billion, including Orient-Express’s net debt, IHCL said in a media statement.
IHCL posted a loss of Rs.6.36 crore for the quarter ended 30 September, compared with a profit of Rs.8.35 crore in the year-ago period .
Orient-Express owns and runs around 50 hotels around the world, including an iconic one at Machu Pichu in Peru. Its stock, which touched a high of $64.80 on 31 October 2007, has lost 81.6% since, most of it in 2008 in the wake of the financial crisis.
The 2007 high coincides with the rejection of IHCL’s bid for an alliance. Around the same time, Orient-Express rejected a $2.55 billion offer from a Dubai government arm.
Then, IHCL and Orient-Express were involved in a spat over their respective brand positioning and image. Orient-Express had dismissed IHCL’s investment as value destructive. The Tata group retorted that Orient-Express’s board wasn’t meeting the needs of its shareholders.
The Charme II Fund managed by Montezemolo and Partners makes investments in leading companies with strong ties to Italy. Montezemolo and Partners is the family investment vehicle of Luca di Montezemolo, chairman of Ferrari and a close personal friend of Ratan Tata, the chairman of Tata Sons Ltd. Tata and di Montezemolo are also directors on the board of Fiat SpA, which owns Ferrari and used to have a tie-up with Tata Motors.
Orient-Express also said on Thursday that it named John M. Scott III president and chief executive officer. He most recently served as president and CEO of Rosewood Hotels and Resorts.
Indian Hotels closed nearly flat at Rs.63.50 on the BSE on Thursday on a day the bourse’s benchmark Sensitive Index declined 0.3%.