* Indian group makes bid after earlier overture rebuffed
* Shares in Orient-Express gain as much as 41 pct
* Indian Hotels part of acquisitive Tata conglomerate
By Aditi Shah
MUMBAI, Oct 18 Indian Hotels Company Ltd
, controlled by the Tata Group conglomerate, made an
unsolicited $1.2 billion bid for luxury hotels group
Orient-Express Hotels, sending the U.S.-listed company's
shares surging as much as 41 percent.
Indian Hotels, which said it was rebuffed by Orient-Express
in a recent approach to take a "significant" stake in the
company, on Thursday offered $12.63 per Orient-Express share, a
40 percent premium to the stock's closing price on Wednesday.
Orient-Express turned down an offer in 2007 from Indian
Hotels to form a strategic alliance. That year, Indian Hotels
acquired a 10 percent stake in Orient-Express for about $211.3
million. It now owns about 7 percent.
"Indian Hotels is seeking friendly transaction negotiations
and is prepared to devote all necessary resources to mutually
beneficial agreement," Indian Hotels said in a statement.
If it succeeds, the deal would be among the largest overseas
deals from an Indian company. It is a rare example of a hostile
bid by an Indian firm.
Orient-Express stock closed 22.5 percent higher at $11.05 on
the New York Stock Exchange.
A spokeswoman for Orient-Express could not immediately be
reached for comment.
Under the proposed deal, Italian group Charme II Fund,
managed by Montezemolo and Partners S.p.A, would invest $100
million for a minority stake in the newly combined group.
Indian Hotels would contribute $650 million in cash while
the rest would be funded by other Tata group entities and debt
from Bank of America, ICICI Bank and Standard
Indian Hotels would also assume Orient-Express debt, which
stood at $529.5 million at June 30.
The steel-to-software Tata conglomerate is India's biggest
business house and has been acquisitive in recent years. Its
Tata Motors made one of India's signature overseas
deals when it paid $2.3 billion in 2008 for British luxury car
maker Jaguar Land Rover.
Indian Hotels met with executives of Orient-Express in
August to discuss "a closer alliance" between the two companies,
according to a letter from Indian Hotels Vice Chairman R.K.
Krishna Kumar that was included in a company filing with the
U.S. Securities and Exchange Commission on October 18.
Orient-Express directors turned down the offer for a
significant equity investment, according to the letter.
"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," the letter said.
"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," it said.
The euro zone economic crisis has squeezed demand for luxury
travel, and the weakening of the euro and other currencies
against the dollar has crimped revenue at Orient-Express, which
has been divesting non-core assets to help reduce debt, increase
liquidity and invest in core assets.
Under the proposed transaction, Orient-Express would remain
an independent company with an independent management team.
Christopher Agnew, an analyst with MKM Partners, said
Orient-Express has a dual-class share structure that he thinks
would prevent Indian Hotels from making a hostile takeover. He
said there could be a back-and-forth between buyer and seller,
with the seller looking to get a higher price.
"This company does have a stake already, so it has shown
interest before," Agnew said. "Orient-Express has high quality
assets around the world which arguably are trading below their
intrinsic value. So from that perspective, is it that surprising
that someone wants to look at the business?"
Indian Hotels has 99 hotels in 56 locations across India and
16 international hotels including the Pierre Hotel in New York.
Orient-Express owns or part-owns and manages 46 luxury
hotels, restaurants, tourist trains and river cruise properties
in 23 countries.
Bank of America Merrill Lynch is advising Indian Hotels.