MUMBAI—A subsidiary of the Tata group, Indian Hotels Company Limited, has filed an all-cash offer to purchase Orient-Express Hotels Limited at $12.63 per share, representing a total value of $1.86 billion.
The price is a 40% premium to Orient-Express’s Wednesday closing price ($9.02) and a 45% premium to the company’s 10-trading-day average.
Indian Hotels Company is the hotel operating company of the Tata group. It already owns 6.9% of Orient-Express shares. IHCL and its subsidiaries, collectively known as Taj Hotels Resorts and Palaces, comprise 99 hotels in 56 locations across India and an additional 16 international hotels.
There are 120.94 million shares of Orient-Express outstanding. The company’s market capitalization as of 11:30 a.m. eastern time was $1.43 billion.
In a letter to Philip R. Mengel, interim CEO of Orient-Express, representatives of Tata refer to a meeting in August the two companies had to establish a private transaction. Orient-Express at that time was not interested, the letter states.
“We continue to believe that a transaction between the two organizations is both financially and strategically compelling to our respective shareholders. Therefore, we are proposing an alternative transaction whereby Tata Entities would acquire all of the outstanding shares of Orient−Express Hotels for $12.63 per share in cash, representing a significant premium to the company’s recent share price,” the letter states. “We believe this offer is in the best interests of Orient−Express Hotels and its shareholders, and deserves careful consideration by your board of directors.”
Indian Hotels executive go on to say they would have preferred to continue discussions confidentially, outside of public domain, but as a significant shareholder of the company they were required to publicly disclose the offer.
Indian Hotels disclosed the potential deal in a U.S. Securities and Exchange Commission on Thursday.
“We believe this premium cash offer represents a compelling value proposition for the company shareholders, especially in light of the current fragile state of the global economy and the lack of clarity about the prospects for recovery,” Indian Hotels executives said in the letter. “Further, this offer also enhances the future of the company’s key constituents, as we will be able to facilitate access to additional investment capital necessary to preserving the quality of assets of Orient−Express Hotels and potentially expanding its footprint.”
Indian Hotels outlined potential future plans for Orient-Express should the deal consummate.
“The new Orient−Express Hotels will continue to remain an independent company, which we will strongly support, with standalone management and board of directors, under the broader Tata group umbrella,” the letter reads. “We are devoted to supporting the continued growth of all of our employees and, under Tata, the employees of the new Orient−Express Hotels will receive the same dedication and support to ensure their development and success.
Tata has a long history of acquisitions, including several recent high−profile global acquisitions, such as Jaguar and Land Rover in 2008 and Corus Steel in 2007.
As of 31 December, Orient-Express owned or part-owned 49 properties (all of which it manages), consisting of 40 individual deluxe hotels, one stand-alone restaurant, six tourist trains and two river/canal cruise businesses.