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Global analysts and investment firms have re-rated the Orient-Express Hotels stock after it rejected Indian Hotels $1.86-billion takeover offer, and are most bullish on the US hotelier whose board has tapped a talented CEO. Along with an annual base salary of $900,000 and other perks, new CEO John M. Scott III has a sign-on award of 440,000 Class A shares, which will vest annually in four equal tranches, starting January 1, 2013.
Indian Hotels holds over 71 lakh Class A shares, acquired twice — in 2007 and 2009 — aggregating to a 6.9 per cent equity stake. Its bid was to acquire the remaining 93.1 per cent Class A common shares of the US hotel chain.
Orient-Express’ dual-class share structure, consisting of Class A and B shares, continues to be a major roadblock in the Indian Hotels’ bid. The Class A shares trade publicly on the New York Stock Exchange and represent 85 per cent of total shares outstanding. These shares represent approximately 36 per cent of the voting rights.
A wholly-owned subsidiary of Orient-Express (OE), called Orient-Express Holdings Limited, owns all 18 million outstanding Class B common shares, which represent about 15 per cent of outstanding shares and 64 per cent of the combined voting power of the two classes for most shareholder vote matters.
Offer too low
By assigning the new CEO a sign-on award of 440,000 Class A shares, the OE board has left Indian Hotels little room for manoeuvre. Analysts also have a positive take on the new CEO, who is expected to drive superior long-term value. Even as the US hotelier wants to let the world know that there is an upside to going it alone, it has also maintained that the Indian Hotels offer is too low, compared with what other luxury properties have fetched. For example, Manhattan’s Four Seasons Hotel reportedly got a takeover bid of $2.4 million per room, while the OE bid is pegged around $700,000 per room.
Any new offer from Indian Hotels will have to take into account the per room rate, as well as the Class A shares assigned to the new CEO.
amritanair.ghaswalla@thehindu.co.in
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