Hedge funds in OEH offer stake to Tatas, DLF
SAC Capital group, DE Shaw and BlackRock have sent feelers to the two Indian groups, people close to the transaction said.
By TNN |
MUMBAI: A clutch of hedge funds with a combined one-third equity interest in the Bermuda-based Orient-Express Hotels (OEH) has approached prospective buyers, including the Tata group and real estate major DLF, to sell their stake in the marque hotel chain.
SAC Capital group, which holds a 22.5% stake in OEH, DE Shaw (5.7%) and BlackRock (5.2%) have sent feelers to the two Indian groups, people close to the transaction said. But the Indian companies, it is believed, have not exactly warmed up to the idea.
DLF group CFO Ramesh Sanka told ET, ���There is no truth in it. We have not been approached by any hedge fund for acquisition of OEH shares.��� A senior official of Indian Hotels, which runs the Taj chain of hotels, told ET, ���We are more interested in dealing directly with the OEH management, rather than acquiring shares from the hedge funds. It (the acquisition of shares from hedge funds) does not fit into the group���s philosophy on hostile takeovers.���
The move is significant for two reasons. One, the hedge funds, which bought into OEH early this year with the intention of forcing some change in the thinking of the management, have given up and see little chance of a transaction happening. Two, it would give an opening to the Dubai Investment Group, which holds a 9.2% stake in OEH, to up its stake.
The Tata group, which had earlier shown an interest in forming an alliance with OEH, owns 11.5% in the hotel company. For long, the Tatas did not believe in hostile takeovers since such moves were not in agreement with the group���s philosophy.
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Dubai Investment may have no such qualms. The fund bought into OEH last year with the intention of making a bigger play. But it would not be an easy the task given the complicated shareholding pattern of OEH. Industry sources said the equity holding structure of OEH makes it a difficult target for hostile bidders. OEH has two classes of shares: While Class B shares are not traded, Class A shares are listed on stock exchanges. They confer different voting rights.
Besides, its memorandum of association and bye-laws contain provisions that could make it difficult for a third party to acquire OEH without the consent of the company���s board. These provisions include ���supermajority shareholder voting provisions��� for the removal of directors and for ���business combination transactions��� with beneficial owners of shares carrying 15% or more of the votes.
Also, the company's board of directors has the right under the Bermuda law to issue preferred shares without shareholder approval, which could be done to dilute the share ownership of a potential hostile acquirer.
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According to the latest annual report, Orient-Express Holdings, an OEH subsidiary which holds the entire Class B shares, enjoys 81% voting power in OEH. Indian Hotels, which holds 11.5% equity of Class A shares, has just 2% voting rights. The genesis of Indian Hotels' association with the OEH management began late last year when the OEH chief executive Paul White rejected the Tatas��� offer of a strategic alliance after acquiring a 10% stake. Mr White also spoke disparagingly about the Indian Hotels��� brand, the Taj.
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This prompted the Indian Hotel vice-chairman RK Krishna Kumar to write a letter in December demanding a ���public apology��� for the ���libellous��� remarks. Although the Tatas are understood to be pursuing their interest in OEH, the OEH management has informed its investors that the issue with the Tatas is closed and the company now wants to move on. Start a SIP with as low as ₹500 with ET Money App!
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