Investor makes buyout offer for Charleston Place co-owner
The ownership of the Bermuda luxury travel brand that runs and co-owns the region’s biggest hotel is in play.
Orient-Express Hotels Ltd., which manages Charleston Place and has a nearly 20 percent stake in the 440-room property, received an unsolicited $1.3 billion buyout offer from one of its biggest investors Thursday.
Indian Hotels Co. is seeking to buy the 93.1 percent of Orient-Express that it doesn’t already own for $12.63 a share, or 40 percent more than Wednesday’s closing stock price.
“This premium cash offer represents a compelling value proposition for the company shareholders, especially in light of the current fragile state of the global economy and the lack of clarity about the prospects for recovery,” Indian Hotels said in a letter directed at Orient-Express interim CEO Philip R. Mengel.
The board of Orient-Express said in a statement that it would evaluate the proposal.
The bidder is part of a sprawling, India-based conglomerate called Tata Group, which owns more than 100 companies in 80 countries and employs 425,000 workers. Its U.S. lodging interests include The Pierre Hotel in New York City.
“The new Orient-Express Hotels will continue to remain an independent company, which we will strongly support, with standalone management and board of directors, under the broader Tata group umbrella. We are devoted to supporting the continued growth of all of our employees, and under Tata, the employees of the new Orient-Express Hotels will receive the same dedication and support to ensure their development and success,” Tata said in a statement.
Orient-Express owns a string of well-known luxury properties, including New York’s 21 Club and Rio de Janeiro’s Copacabana Palace. Under financial pressure, it has been selectively selling off some of its assets.
Charleston Place has been a bright spot for the company by posting healthy gains in room rates and occupancy levels, according to financial filings.
Orient-Express has been an investor in the downtown hotel and retail complex since 1995, when it was part of Sea Containers Ltd., which was forced to sell the business in late 2005. The hotelier controls a 19.9 percent stake in the company that owns the property, Charleston Center LLC.
Indian Hotels has been an investor in Orient-Express for more than five years. It floated at least one previous buyout proposal, in 2008, but that offer was rebuffed.
Chris Agnew, an analyst at Stamford, Conn.-based MKM Partners who has a buy rating on Orient-Express, told Bloomberg News that Orient-Express board members will seriously consider this latest offer.
“Otherwise they will have to show shareholders how they can create more value by being independent,” he said, according to Bloomberg.
“They are under-invested in some markets, and with a larger company with access to capital behind them, making investments would be a lot easier.”
It was unclear whether a sale of the business would effect the terms of a $10 million federal loan that the city of Charleston arranged to help the original developers build the hotel in 1984. That loan has not been repaid, and interest has continued to accrue. The city did not respond to a request for comment.
Charleston Place General Manager Paul Stracey said he had no information about Thursday’s buyout bid, other than what was being reported by news outlets.