Indian Hotels, which operates the Taj chain, termed its surprise $1.87-billion offer for the luxury hotel chain, Orient-Express, as “friendly”, but its Bermuda-based takeover target said the offer was “unsolicited”, and promised to respond accordingly.
Jittery investors of Indian Hotels, meanwhile, sold the company’s shares, pulling its scrip down by 5.48 per cent to Rs 66.45.
“This is a very good, friendly offer for all Orient-Express stakeholders. We have directly approached the board and hope to hear from them soon,” Tata Sons Director and Indian Hotels Vice-Chairman R K Krishna Kumar said just before the opening of Starbucks’ first outlet in Mumbai.
But, in a statement, Orient-Express said its board expected to evaluate the unsolicited proposal carefully and respond in due course.
On the negative reaction of Indian shareholders to the acquisition move, Kumar, a Tata group veteran, said the Tata group shareholders had usually given a thumbs down to their “daring” takeover moves in the past. “But, in the long run, shareholders have benefited from our daring moves. Take, for example, JLR... just one quarterly profit of the company is equal to our acquisition price today,” he said. Similarly, the shareholders of Tata Global Beverages (TGB) and Tata Steel had benefited a lot from the group’s overseas acquisitions, Kumar said.
Kumar was referring to TGB’s acquisition, and later sale, of energy drinks company Glaceau, in which Tata Tea and Tata Sons took home a $523-million profit in 2007. Kumar said he expected Orient-Express to come back on its offer in three weeks. He clarified $1.8 billion was the enterprise value of Orient-Express and the offer included takeover of the debt of the company.
Many analysts, however, didn’t share Kumar’s enthusiasm. The deal, if it succeeded, would put more strain on the profitability and valuation of Indian Hotels, they said. Others said the deal made sense from a very-long-term perspective.
Orient-Express shareholders, meanwhile, are a happy lot. Its scrip went up by 22.51 per cent on Thursday after the Tata offer. The stock has risen by 48 per cent this year since January and almost half of this gain has come after the Tata offer.