* Orient-Express has resisted past approach from Indian
* Deal could be last $1 bln overseas buy from Tata
conglomerate under Ratan Tata
* Orient-Express says to evaluate offer
(Updates shares, adds comments, background)
MUMBAI, Oct 19 (Reuters) - Shares in Indian Hotels Co Ltd
, controlled by the Tata Group conglomerate, dropped 5
percent on Friday after it made an unsolicited and unexpected
$1.2 billion bid for luxury hotel group Orient-Express Hotels
, which it has long coveted.
Indian Hotels, rebuffed by Orient-Express in a recent
approach to take a "significant" stake in the company, offered
late on Thursday to pay a 40 percent premium to buy out the
hotel group. Orient-Express owns a global portfolio of
properties including Hotel Cipriani in Venice and the 21 Club in
"It seems clear to us that (Indian Hotels) wants to position
itself as a global hospitality chain," JPMorgan analysts wrote.
Shares in Orient-Express, which is headquartered in Bermuda,
rose as much as 41 percent in New York on Thursday before
closing at $11.05, up 22.5 percent on the day.
Indian Hotels, with a market value of $1.07 billion, is
offering $12.63 a share in a rare hostile approach from an
The bid may prove the last bold act by Tata Group Chairman
Ratan Tata before he retires at the end of this year after
building the software-to-steel conglomerate into India's biggest
business house through a series of large overseas acquisitions.
Its Tata Motors Ltd made one of India's signature
buys when it paid $2.3 billion in 2008 for British luxury car
maker Jaguar Land Rover, a deal whose wisdom was questioned at
the time but has proven to be a winner.
Tata Steel Ltd's $12.7 billion takeover in 2007 of
Anglo-Dutch steelmaker Corus, India's largest outbound deal, has
been less successful, with the European steel sector plagued by
overcapacity, high costs and a sluggish economy.
Orient-Express confirmed in a statement late on Thursday
that it had received the proposal and would evaluate it. The
company has a dual share structure that would make a hostile
takeover hard to pull off.
Indian Hotels, which owns the landmark Taj Mahal Palace
hotel in Mumbai, was thwarted in its 2007 offer to form a
strategic alliance with Orient-Express. That year it bought a 10
percent stake in the company, and it now owns about 7 percent.
Indian Hotels met with Orient-Express in August, but its
effort to take a significant stake in the company was rejected.
One analyst at a Mumbai brokerage who tracks Indian Hotels
and declined to be identified said the proposal does not look
attractive for the Mumbai-based company's shareholders.
"It will be earnings dilutive and worsen the debt profile in
a troubled business environment. Orient-Express gets a third of
its revenue from Europe, which is facing problems," he said.
"Paying 40 percent premium for a property in a low-growth
region is probably not a great idea in this environment."
(Reporting by Tony Munroe and Sumeet Chatterjee)