Orient-Express rebuffs Tata proposal - again!

Turning down the offer of the Tata Group for an alliance, US-listed luxury hotel chain Orient-Express said any association with the "predominantly Indian" chain would erode the value of its premium brands.

"We do not believe there is a strategic fit between your predominantly domestic Indian hotel chain and our global portfolio of luxury hotels," Orient-Express CEO Paul White said in a letter to Indian Hotels vice chairman R K Krishna Kumar while replying to the Tatas' proposed strategic alliance.

"We believe any association of our luxury brands and properties with your brands and properties would result in a reduction in value of our brands and of our business, and would likely lead to erosion in RevPar (revenue per available room) premiums currently achieved by our properties," White added.

The letter comes within a week of US dealers association of global car major Ford's Land Rover, currently on the takeover radar of the Tata Group, saying an Indian ownership could make the viability of the luxury brand doubtful.

Indian Hotels, a Tata Group company, said in a regulatory filing last Friday that they had acquired 11.5% stake in Orient-Express and sought discussions to explore a "business combination."

Orient-Express owns New York's prestigious Club 9 Restaurants and a number of luxury hotel brands in the US and other countries.

In a strongly worded letter to Krishna Kumar, White said: "As you are fully aware, we have previously advised you that Orient-Express has no interest in pursuing the proposals... We felt that our prior correspondence with you was sufficiently clear in communicating our position on this matter, but because you have again expressed an interest in a transaction with Orient-Express, we feel it is appropriate to outline some of the reasons why we do not wish to pursue your proposals. We do not wish to be involved in an attempt to improve the performance of your non-Indian properties."

The Tata Group plan includes bringing its non-Indian hotels under the Orient-Express fold, holding a small stake in each other's equity capital and representation on each other's boards.

"Orient-Express Hotels had previously rejected a similar proposal from the company. The board of Orient-Express Hotels continues to consider that the IHCL proposal is not in the interests of Orient-Express Hotels and its shareholders and therefore has advised them accordingly," Orient said in a statement issued yesterday.

Earlier last week, a report in the Wall Street Journal quoted Ken Gorin, chairman of the Jaguar business operations council, as saying that Land Rover and Jaguar brands should not be sold to the Indian bidders.

"I don't believe the US public is ready for ownership out of India for a luxury-car brand such as Jaguar... I believe it would severely throw a tremendous cast of doubt over the viability of the brand," Gorin told the daily.

The WSJ report quoted Gorin as saying he was not judging the management capabilities of Tatas or Mahindras. "My concern is perception (in the marketplace), and perception is reality. It's about saying there are unique image issues with two of the bidders that the other one doesn't have," Gorin said.

Gorin pointed out that his concerns would not be relevant if Jaguar was a mass-market brand.