Orient-Express snubs Tata, says Indian tag tacky
Orient-Express Hotels has rejected the Tata group’s fresh overtures for an alliance with the company, delivering a setback to the Tatas’ ambitious plans of owning a luxury hotel chain with a powerful brand name.
Orient-Express, the Bermuda-based, US-listed luxury hotel chain, said that any association of its brands and properties with the ‘predominantly domestic’ Indian hotel chain would result in an erosion of the brand and business value of its “global portfolio of luxury hotels and unique travel experiences”.
In a letter to Indian Hotels vice-chairman RK Krishna Kumar, Orient-Express said that it was not interested in any deal with the company. “As you are fully aware, we have previously advised you that Orient-Express has no interest in pursuing the proposals described in your letter of November 14, 2007,” said Orient-Express Hotels president and CEO Paul M White.
“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,” he added.
The development is a blow to Indian Hotels which had nurtured hopes of striking an alliance with the famous luxury hotel chain after buying a 10% stake in September this year. Orient-Express Hotels owns or part-owns and manages 50 luxury hotels, restaurants, tourist trains and river-cruise properties in 25 countries, including New York’s 21 Club. Made famous through Agatha Christie’s famous novel Murder on the Orient-Express, the hotel chain has become synonymous with luxury and high-end travel over the years.
IHCL had hoped to use Orient-Express’ rich clientele to increase business for its domestic hotel chain. It had also wanted to expand the use of the Taj brand name. The second rebuff means that the Tata group will have to go back to the drawing board and rework its strategy.
Shares of Indian Hotels ended 0.6%, up at Rs 142.60 in a buoyant market. The shares have risen 4% in the past week and 1.8% over the past month. “It won’t make a big deal. The sector is doing well and the company is always looking out for acquisitions. One deal going awry is not going to have much of an impact,” said Alok Agarwal, analyst at Motilal Oswal, who has a ‘buy’ rating on the stock.
“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.
The letter also says that the Taj approach to branding, whereby long-standing individual hotel brands are replaced with the “Taj” brand is “contrary to our approach, whereby we develop and enhance individual hotel brands and ultimately extend these hotel brands to additional properties”.
The option of a hostile bid exists, but largely on paper. The executives and directors of Orient-Express have a combined voting power of over 80%. Buying shares from the market doesn’t give Indian Hotels any voting rights.
In an attempt to further make life difficult for any raider, Orient-Express also decided at its Monday board meeting to reduce the trigger limit for an open offer from 20% to 15%.
Indian Hotels officials said they would adopt a ‘wait-and-watch’ approach, and are not contemplating any hostile takeover. “This is a good investment for us and we will retain our holding in the company till the appropriate time,” said sources.
It is quite possible that the company may decide to sell its stake at some point and exit. Group company Tata Tea had sold its entire 30% holding in enhanced water maker Glaceau to Coke earlier this year after initially calling it a strategic and long-term investment.
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