Object of pursuit
Mumbai, Oct. 26: The Tatas are stepping up pressure on the Orient-Express board to come to the negotiating table and sew up a deal.
A week after submitting an offer to buy all the class A shares of the Bermuda-based luxury hotel chain at $12.63 per share, R.K. Krishna Kumar, vice-chairman of Indian Hotels Company, which is spearheading the bid to acquire Orient-Express, wrote another letter to press its case.
In the letter dated October 25, Krishna Kumar told Orient-Express chairman J. Robert Lovejoy, “Mr Ratan Tata, chairman of the Tata group, and Mr Luca Montezomolo, chairman of Ferrari, will be happy to meet with you and your board at your earliest convenience. I am sure that as a long standing and a significant shareholder, you will extend this courtesy to us.”
Krishna Kumar said he was forwarding the letter to Phillip Mengel, interim chief executive officer of Orient-Express Hotels, and other members of the board.
The Tata offer had come out of the blue on October 18 and was generally seen as a hostile bid that revived an overture it had first made in 2007, which was rudely rebuffed by then managing director Paul White.
In a strange turn of events, White, who resigned from Orient-Express last year, has now teamed up with the Tatas and the Montezomolo family to acquire the loss-making luxury hotel chain. In the original letter to Mengel, the Tatas had said White would hand-pick top executives who would help him run the luxury chain.
The all-cash Tata offer is valued at $1.86 billion, including the net debt of Orient-Express. Orient-Express hasn’t responded to the Tata offer yet.
Krishna Kumar was reported to have said that the Tatas expected a reply in three weeks. It wasn’t immediately clear why the Tatas chose not to wait for the Orient-Express response before shooting off the second letter.
The Tatas had said in the first letter that they were offering a 40 per cent premium for the Orient-Express shares. In the latest missive, they appear to suggest that they might be ready to raise the offer if the Orient-Express honchos can put forth a compelling argument.
“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 prior to our announcement on October 18… we have only had access to public information and...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.”
The letter urged Lovejoy to “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”.
Krishna Kumar said the Tatas wanted to meet and “further explain our motives in seeking to acquire Orient Express Hotels and to dispel any misunderstanding you may have about our offer and our goals with respect to the company”.
The letter also tried to assuage fears about a hostile bid. “IHCL, as a part of the Tata group, has always endeavoured to pursue friendly transactions with counter-parties…we are seeking to forge …an alliance between two great names in the hospitality industry to significantly broaden the footprint of both companies and create a new global competitor in the luxury segment of the hospitality industry.”
The Tatas also tried to allay any misgivings about the takeover and tried to push their credentials as a responsible group wedded to the highest principles of corporate governance.
“We want to reiterate that Orient Express Hotels will remain a separate and independent company with standalone management and board of directors, as has been the policy and practice throughout the Tata group including in our major acquisitions such as Jaguar/Land Rover and Corus.”
The Tatas hold 6.9 per cent of the Class A shares while White holds 0.1 per cent.
Orient Express had devised a poison pill mechanism in 2007 that created a special class of super-voting Class B shares to overwhelm and shut out corporate predators.
On Friday, the Orient Express stock was quoting at $ 11.45 on the New York Stock Exchange. It had closed at $ 9.02 on the day before the Tatas made their latest bid.