A week after Indian Hotels Company, promoted by the Tata group, put an unsolicited bid to acquire Bermuda-based Orient-Express Hotels for $1.2 billion (over Rs 6,300 crore) the company has hinted at an improved offer.In a letter sent to the Chairman of Board of Directors of Orient-Express Hotels J. Robert Lovejoy on Thursday, Indian Hotels Vice-Chairman R K Krishna Kumar expressed his long-standing and continued buy-out 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 out 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.
The idea of a revised bid offer from Indian Hotels comes at a time when Switzerland-based privately-owned company Reuben Brothers, which owns seven per cent in Orient-Express Hotels, is rumored to be lining up a counter bid.
The 111 year-old Indian Hotels and its Italian partner Montezemolo and Partners S.p.A, has agreed to pay $12.63 per share in cash for Class A shares of Orient Express. Reuben Brothers bid, however, is speculated to be at $16 per share, though there has been no official confirmation on this.
Krishna Kumar also reiterated Indian Hotels intention to keep Orient-Express a separate and an independent entity just 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 itself to 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 million (about Rs 3500 crore), Montezemolo will pump in $100 million (about Rs 534 crore) in cash for the deal. The rest will come from debt Bank of America, ICICI Bank and Standard Chartered Bank. Indian Hotels presently owns 6.9 per cent in Orient. Indian Hotels would also assume Orient-Express debt, which stood at $529.5 million (Rs 2,800 crore) at June 30.
"In 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 met with you and your board to clearly set out the benefits of our offer to your shareholder as well as the basis for the alliance we are seeking", added Krishna Kumar.
Orient Express owns some of the finest hotels in Europe many of which are housed inside irreplaceable heritage properties, as declared analysts and market experts. The Taj group, has been desperately exploring expansion opportunities abroad after having dominated the Indian market for several years.
Krishna Kumar met the interim chief executive officer of Orient-Express Philip Mengel in August this year where in the Indian company expressed its willingness into entering into a strategic alliance with Orient Express. 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 long standing and significant shareholder you will extend this courtesy to us", added Krishna Kumar.