A week after Indian Hotels Company (IHC), promoted by the Tata Group, put an unsolicited bid to acquire Bermuda-based Orient-Express Hotels for $1.2 billion (Rs 6,300 crore), the company has hinted at an improved offer.
In a letter yesterday to J Robert Lovejoy, chairman of the board of directors of Orient-Express Hotels, IHC vice-chairman R K Krishna Kumar expressed his long-standing and continued buyout interest in the foreign company.
"We have long understood that historically you were hesitant to meet with us because we have never put a firm offer on the table. We have now put together an attractive, fully-financed offer, with a 40 per cent premium to the market price. However, to date, we have only had access to public information and, as such, our offer was informed only by this limited data. To the extent you and your advisors wish to discuss value-drivers of which we may not be aware, we would be pleased to engage in a constructive dialogue regarding these issues," Krishna Kumar has said.
The idea of a revised bid offer comes at a time when Swiss-based privately-owned Reuben Brothers, which owns seven per cent in Orient-Express Hotels, is rumoured to be preparing a counter-bid.
The 111-year-old Indian Hotels and its Italian partner, Montezemolo and Partners S.p.A, have agreed to pay $12.63 a share in cash for Class A scrip of Orient-Express. Reuben Brothers' bid is speculated to be at $16 a share, though there has been no official confirmation.
Krishna Kumar also reiterated Indian Hotel's intention to keep Orient-Express a separate and independent entity. like the group's earlier acquisitions of Jaguar Land Rover by Tata Motors and Corus by Tata Steel.
"Although the company will be able to avail the benefits of being part of the broader Tata Group, we want to reiterate that Orient-Express Hotels will remain a separate and independent company, with stand-alone management and board of directors, as has been the policy and practice throughout the Tata Group. The Tata Group has scrupulously stood by its commitment to good governance," added Krishna Kumar.
While Indian Hotels has agreed to make an aggregate cash contribution of up to $650 mn (about Rs 3,500 crore), Montezemolo will pump in $100 mn (Rs 535 crore) in cash. The rest will come from debt, talen from Bank of America, ICICI Bank and Standard Chartered Bank. Indian Hotels presently owns 6.9 per cent in Orient. IHC would also assume Orient-Express debt, which stood at $529 mn (Rs 2,800 crore) on June 30.
"In the light of the foregoing and the fact that we have been a significant long-term shareholder, we request that you give us an opportunity to meet with you and your board to clearly set out the benefits of our offer to your shareholders, as well as the basis for the alliance we are seeking," says Krishna Kumar.
Orient-Express owns some of the finest hotels in Europe, many of which are housed inside irreplaceable heritage properties as declared by analysts and market experts. IHC has been exploring expansion opportunities abroad after having dominated the Indian market for several years.
Krishna Kumar had met Orient Express' interim chief executive officer, Philip Mengel, in August. IHC, he'd said, was willing to enter a strategic alliance. OEH, however, declined any equity participation from IHCL. In September, however, IHCL reproached OEH with a revised offer.
In yesterday's letter to Lovejoy, Krishna Kumar also stressed on the idea of a possible meeting with Tata Group chairman Ratan Tata. "Given the urgency and the importance of the subject, Mr Ratan Tata, Chairman of the Tata Group and Mr Luca Montezemolo, chairman of Ferrari, will be happy to meet with you and your board at your earliest convenience. I am sure that as a longstanding and significant shareholder, you will extend this courtesy to us," added Krishna Kumar.