Orient-Express move no hostile bid, says IHCL’s Krishnakumar

The Tata-group promoted Indian Hotel Company or IHCL's latest attempt at acquiring Bermuda-based Orient-Express Hotels is not a hostile bid, IHCL's vice chairman RK Krishnakumar said on Friday.

"If it was a hostile bid, we would have approached the shareholders directly and not gone through the board," he said. Krishnakumar added that IHCL has been in discussion with Orient-Express for the last couple of months and the latter's board will take another three weeks to get back with a response.

A positive response from Orient-Express though is not a certainty, despite the offer price being 11.5 times the Enterprise Value/EBITA, a metric used by analysts to gauge the value of a company.

The current offer by IHCL and Charme II Fund is an all cash offer of $12.63 per share valuing Orient-Express Hotels at approximately $1.86 billion. IHCL already owns 6.9% in the Bermuda-based hospitality chain.

The executives of the two companies met in August 2012 but the meeting ended up in a disappointment for IHCL, who operate the Taj brand of hotels.

"While we are disappointed that your Board of Directors has indicated they would not be interested in exploring a transaction involving a significant equity investment by IHCL, we continue to believe that a transaction between the two organisations is both financially and strategically compelling to our respective shareholders," Krishnakumar wrote in a letter to Orient Express Hotels' interim CEO Philip R Mengel.

In an immediate response, Orient-Express Hotels termed the offer "unsolicited" and said it will carefully review the proposal before coming to a decision. IHCL's past approaches to acquire the global hospitality chain which owns more than 40 deluxe hotels, six tourist trains, a restaurant and two river cruise businesses, have fallen flat.

The Indian company's bid in 2007 received stiff criticism from Paul White, the then chief executive officer of Orient-Express Hotels. But, the bid this time also involves White, who had been with Orient Express Hotels for over two decades in several roles. Ratan Tata's long time friend Luca di Motezemolo, chairman of Ferrari S.p.A is also involved in the deal through the Charme II Fund which will put in $100 million to be minority stake holder.

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