Report by OD bureau, Mumbai: The Indian Hotels Company (Indian Hotels) today announced that it, along with Charme II Fund, an Italian fund managed by Montezemolo and Partners SpA, has sent a letter to Orient-Express Hotels (Orient-Express) proposing to purchase all of the outstanding shares of Orient-Express’ Class A common stock for $12.63 per share in cash.
Indian Hotels and Charme II Funds’ proposal, which would create one of the world’s preeminent portfolios of luxury hotels and resorts, is valued at approximately $1.86 billion, including Orient-Express’ net debt. The all-cash offer represents a 40 percent premium to Orient-Express’ closing stock price on October 17, 2012,the last trading day prior to this announcement, a 45.2 percent premium to Orient-Express’ 10 trading day average of closing stock prices, and a premium to the 52-week closing high of $10.90 per share.
Indian Hotels has been a shareholder of Orient-Express for over five years and currently holds approximately 7 percent of Orient-Express’ Class A stock. As such, US securities laws require that Indian Hotels publicly disclose its offer. Indian Hotels has filed the proposal letter with the US Securities and Exchange Commission (SEC); as part of an amendment of its Statement on Schedule 13D it can be found on the SEC’s website at www.sec.gov.
“Indian Hotels has great respect for Orient-Express and its collection of unique luxury hotel properties around the world and we are very excited at the prospect of bringing the two great companies and brands together,” said RK Krishna Kumar, vice vhairman, Indian Hotels. “We believe this premium all-cash offer represents a compelling and immediate value proposition for Orient-Express’ shareholders and provides Orient-Express with access to the additional capital necessary to preserve its properties and heritage while potentially expanding its footprint.”
Mr Krishna Kumar continued, “While we would have preferred to negotiate confidentially with Orient-Express, US securities laws required public disclosure of our proposal. However, we are prepared to devote all necessary resources to expeditiously complete due diligence. We look forward to Orient-Express’ prompt reply and the opportunity to engage in further discussions that will result in a mutually beneficial transaction for both companies’ shareholders and other constituencies.”
A senior Indian Hotels spokesperson, together with a Montezemolo Partners’ spokesperson, assured Orient-Express stakeholders of their deep commitment to the company. “Orient-Express would remain an independent and autonomous company with its own board of directors”.
“The active presence of Montezemolo & Partners, as manager of Charme II Fund, will be extremely strategic for supporting the Italian assets and operations of OEH and for Tata group it is an ideal partner sharing common ethical values and business principles.”
“Orient-Express represents, with its history and iconic assets, a supreme and unique jewel in the luxury hotel industry” said Matteo di Montezemolo, CEO of Montezemolo & Partners. “We strongly believe in our longstanding partnership with the Tata group and we are sure that we will together represent the ideal shareholders to further expand Orient-Express' worldwide business model.”
Property oversight and management:
Under the terms of the proposed transaction, Orient-Express would remain an independent company, strongly supported by Indian Hotels, with an independent management team. Indian Hotels is devoted to supporting the continued growth of all of its employees. The employees of a combined Indian Hotels - Orient-Express will receive the same dedication and support to ensure their development and success.
Financing and approvals:
Indian Hotels has secured the requisite capital to consummate the entire transaction, including debt financing from Bank of America NA, ICICI bank and Standard Chartered bank. Given Orient-Express’ award-winning and irreplaceable collection of properties throughout Italy, Indian Hotels also has an agreement in place with Charme II Fund to invest $100 million for a minority stake in the combined company. Charme II Fund is managed by Montezemolo & Partners SpA, and makes investments in leading companies with strong ties to Italy.
Additionally, Indian Hotels has obtained all necessary approvals from Indian Hotels' board of directors, subject to satisfactory completion of due diligence, the execution of a definitive agreement and receipt of requisite regulatory approvals.
The Indian Hotels offer is based upon publicly available information regarding Orient-Express Hotels and is conditioned upon the satisfactory completion of customary due diligence. Further, Indian Hotels believes the negotiation of a mutually acceptable definitive agreement can be completed in parallel with the due diligence efforts.
Agreement with James Sherwood:
Indian Hotels has entered into an agreement with James Sherwood, former chairman and founder of Orient-Express, whereby Mr Sherwood has agreed to eliminate certain rights he would otherwise have to acquire the Cirpriani Hotel and related assets in the event of an acquisition of Orient-Express by Indian Hotels.
Bank of America Merrill Lynch is serving as sole financial advisor to Indian Hotels, Shearman & Sterling LLP is serving as legal advisor to Indian Hotels, and Hotel Advisor (UK) is providing industry expertise for the proposed transaction.