James Sherwood: Restricted

Mumbai, June 3: Orient-Express Hotels has placed a gag order on its founder James B. Sherwood through an agreement signed in April which has been made public only now.

The pact bars Sherwood from talking to third parties “without prior written authorisation by the board of directors or the president and chief executive officer (Paul White)”.

The Tatas have been unsuccessfully pushing for an alliance with the hotel chain for almost two years. They have a 9.2 per cent stake in Orient-Express — down from the 11.5 per cent earlier — after the hotel chain came out with a fresh issue of 22.5 million Class A shares in April.

The Tatas picked up another 2.25 million shares, at $5.75 a share, by subscribing to the recent Orient issue. They have created a corpus of $51 million through a loan from ICICI Bank UK and have indicated they could raise their stake through open market purchases.

Information on Sherwood’s gag order was outlined in a note placed before Orient’s shareholders ahead of the annual meeting to be held in Hamilton, Bermuda on Friday (June 5). The agreement sought to limit Sherwood’s “acts and communications on behalf of the company involving third parties outside of the company”.

“Sherwood agreed that if he consciously fails to abide by the limitations, he may be removed as a director by the board for cause in accordance with the company’s bye-laws,” the note said.

There was no information in the note to indicate why the gag order had become necessary.

Sherwood is a director at the luxury hotel chain he founded in 1976. His term ends in June next year.

It is important to note that Sherwood — who stepped down as non-executive chairman of the Bermuda-based luxury hotel chain in June 2007 —- had initially held talks with the Tatas on a possible hotel alliance in August that year after which the Indian Hotels Company started buying shares in Orient-Express.

In September 2007, the Tatas had picked up a 10 per cent stake in Orient-Express for $211 million. They also signalled their desire to bring the group’s overseas hotel properties ranging from Blue in Sydney to the Pierre in New York and Campton Place in San Francisco under the overarching umbrella of Orient-Express.

Sherwood’s son Simon was the CEO of the company till mid-2007 before being eased out of the company in a major reshuffle.

The Tata share purchase triggered a heated controversy after which the Orient-Express board devised poison pill measures to ward off any threat of a takeover.

The Tatas, who have never conducted a hostile takeover, persisted with discussions on a global alliance with the Orient-Express but were rudely fobbed off by Paul White.

At the height of the battle in December 2007, the Tatas had paid $60 per Orient-Express share.

The worldwide recession has hit Orient-Express hard and its stock has been badly mauled on the New York Stock Exchange and now hovers just over $8 a share. In the quarter ended March 31, the company had suffered a net loss of $14.6 million on revenues of $89.4 million.