Big buy

Mumbai, Sept. 17: Ratan Tata may have failed to grab Raffles in Singapore some years ago, but he has more than made up for it by scooping up a slice of the Orient-Express.

In a move that could clearly overshadow his other overseas acquisitions in the hospitality sector such as The Pierre and the Ritz Carlton, Indian Hotels Company (IHC) has acquired 10 per cent in Orient-Express Hotels for $211.28 million (Rs 857 crore).

Orient-Express Hotels owns or part-owns and manages more than 35 hotels in 25 countries. But most importantly, it owns the legendary Venice Simplon-Orient-Express, which opened the enchanting world of Asia to Europe’s royalty and nouveau riche in a bygone era.

It owns six other tourist trains, including The Eastern & Oriental Express in Southeast Asia and The Royal Scotsman. The company also part-owns and manages PeruRail in Peru, which operates the Cusco-Machu Picchu train service used by nearly every tourist to Peru.

Some of the hotels it manages include Hotel Cipriani in Venice, Mount Nelson in Cape Town, Copacabana Palace in Rio de Janeiro and the Observatory in Sydney.

Indian Hotels acquired the 10 per cent stake in Orient-Express through its wholly owned subsidiary Samsara Properties, which is registered in the British Virgin Islands.

Samsara purchased almost 4.25 million shares between August 17 and September 14 from the market. Samsara bought the shares after it received a loan of $300 million from London-based Tata Ltd, which carries an annual interest rate of 6.25 per cent. On August 20, Samsara drew $135 million under the terms of the loan agreement. It drew another $100 million on September 11 and later a final tranche of $65 million.

IHC now wants to open discussions with Orient-Express Hotels to form an alliance.

In a filing with the SEC, it said it had delivered a letter last Friday to James B. Hurlock, chairman of Orient-Express Hotels, indicating its interest in pursuing a “possible association between IHC and Orient-Express Hotels”.

IHC said it would like to discuss a possible association that includes combination of the international properties of the two companies.

Significantly, it said that after the proposed dialogue with Orient-Express, IHC and Samsara would review their investment in Orient-Express on a regular basis. It would then decide whether to acquire additional shares in the company or dispose of all or a portion of the shares it has bought.

IHC vice-chairman R.K. Krishna Kumar, said: “The possible combination of the two brands will create a powerful competitive advantage.”