Orient-Express turns down Indian Hotels proposal, again
US-based hotel chain Orient-Express has turned down, for the second time, a proposal from Indian Hotels Company Ltd for a strategic alliance.
This outright rejection comes a few days after the Tata Group, which owns the Taj group of hotels, increased its stake from 10 per cent to 11.5 per cent in the US luxury hotel chain.
On Monday, in a strongly worded letter to Mr R. K. Krishnakumar, Vice-Chairman of Indian Hotels Co Ltd, Orient-Express Hotels Ltd said “ We do not believe that there is a strategic fit between your predominantly domestic Indian hotel chain and our global portfolio of luxury hotels and unique travel experiences, and we do not wish to be involved in an attempt to improve the performance of your non-Indian properties.”
“We believe any association of our luxury brands and properties with your brands and properties would result in a reduction in the value of our brands and of our business and would likely lead to erosion in the RevPar premiums currently achieved by our properties,” said the letter from Mr Paul M. White, President and CEO of Orient Express.
“The board of directors feels that the proposal was inconsistent with our business strategy and is not in the best long-term interest of Orient-Express and its shareholders”, Mr White said.
When contacted, a spokesman for the Tata Group, said “ we do not like to comment on the issue at the moment.”
In September, Indian Hotels announced that it had acquired a 10-per cent stake in Orient-Express for $211.28 million, through its wholly owned offshore subsidiary Samsara Properties Ltd. Between September 17 and December 7, IHCL purchased a further 1.5 per cent stake from the open market for a total consideration of $35 million.
After IHCL announced its 10-per cent acquisition, Orient-Express said that it was not keen on any alliance with Indian Hotels. The company had said that the “management has not entered into strategic discussions with IHCL, the Taj hotels group or any of their affiliates. The company has today (September 18, 2007) responded to IHCL stating that it does not wish to pursue the proposals for discussion contained in their letter.”
In November, Mr Krishna Kumar, had written to Mr Paul M. White, seeking a meeting with the company’s board to discuss IHCL’s proposal with the company. Mr Krishna Kumar noted that Orient-Express had not responded to the IHCL proposal outlined at a meeting on October 12. “As you will remember from our meeting, and indeed from our 19th October letter, we agreed to make no further stock purchases until we had a reply as to the suggested meeting, which you indicated would be following your early December board meeting,” Mr Krishna Kumar said in his letter.
Incidentally, Mr Ratan Tata, Chairman of Tata Group, reportedly said last week that the group is not in favour of any hostile takeovers.
Interestingly, a group of Dubai-based investors also picked up 9 per cent stake in Orient Express, according to a filing with US Securities and Exchange Commission on October, 18, 2007.
The Re 1 IHCL shares closed on NSE on Tuesday at 143.60, 1.63 per cent up from the previous close of Rs 141.30
Orient-Express shares quoted $57.79, lower by 0.12 per cent on New York Stock Exchange, in early trade on Tuesday.
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