Indian Firm Regrets Orient Express Investment
The operators of an Indian hospitality group are ruing their 2007 investment in Bermuda-based luxury hotel chain Orient Express, a leading Mumbai business journal reports today (Dec. 28).
India Hotels Company Ltd., along with subsidiary Samsara Properties, invested $247 million to buy a 10 percent holding in the Orient Express Hotels — which owns, co-owns or manages more than 50 hotels, restauarants and associated hospitality industry amenities throughout Europe, Africa, Asia and North and South America.
The present value of Mumbai-based IHCL’s investment stands at just $93 million and the Indian group’s attempts to have a bigger say in the operations of Orient Express Hotels have been repeatedly stymied by boardroom manoeuvering.
“In 2007, when it made the investment, IHCL was looking for a global alliance with Orient and wanted a larger role in its management,” says “Business Standard”. “But in a rude jolt … Orient said any such association with an Indian group would erode its brand value.”
To preclude any hostile takeover attempts, Orient Express Hotels later issued over 18 million Class B shares — with high voting rights — to its wholly-owned subsidiary Orient Express Holdings.
Now IHCL has just 2.6 per cent voting rights, compared with more than 66.5 per cent held by Orient Express Hotels promoters.
Due to the creation of the controversial Class B shares, some institutional shareholders had launched legal proceedings in the Supreme Court of Bermuda challenging Orient Hotel Express’ corporate governance structure.
But on June 1, the Bermuda Supreme Court upheld the company’s class B shareholding structure and dismissed the petition filed in early 2009 by two hedge fund groups challenging that structure. One of them has indicated an intention to appeal this judgment.
Unlike Class A shares, Class B shares are not publicly traded.
