Indian Hotels shares hit on Orient Express

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 New York.

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 Indian acquirer.

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.

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