6:00 p.m. | Updated
Shares of Orient-Express Hotels surged in trading on Thursday after the hotel arm of the Tata conglomerate of India made an offer for the rest of the company that it does not already own.
Orient-Express, based in Bermuda, is an owner, manager and investor in luxury hotels, tourist trains, river cruises and restaurants â€" including the 21 Club in Manhattan. It operates in 23 countries.
The bidder, the Indian Hotels Company, currently has a 6.9 percent stake in Orient-Express. The offer of $12.63 a share in cash represents a premium of 40 percent to the closing price of Orient-Express on Wednesday, and a premium of 45.2 percent to its 10-trading-day average. Indian Hotels said it would finance the buyout through a combination of borrowing and equity.
On Thursday, the stock price of Orient-Express jumped as much 38 percent, its sharpest intraday rise since the shares started trading on the New York Stock Exchange in 2000, according to Bloomberg News. By the close of trading, the shares ended at $11.05, up 22.5 percent on the day. With the gains, the market value of Orient-Express was $1.3 billion.
In a letter to Philip R. Mengel, the chief executive of Orient-Express, a director of Indian Hotels, R.K. Krishna Kumar, wrote: “While we are disappointed that your board of directors has indicated they would not be interested in exploring a transaction involving a significant equity investment by I.H.C.L., we continue to believe that a transaction between the two organizations is both financially and strategically compelling to our respective shareholders.â€
In a statement, Orient-Express Hotels said that its board would “evaluate the proposal carefully and respond in due course.â€
Indian Hotels had made an overture to Orient-Express in 2007 that was rebuffed. The luxury-hotel chain, popularly known as the Taj Group, is controlled by Tata Sons, India's largest business conglomerate. In recent years, its executives have sought to expand the company abroad primarily by buying, leasing or signing management contracts for marque hotels like the Pierre in New York, the Ritz Carlton in Boston and Compton Place in San Francisco.
Corporate legend has it that Jamsetji N. Tata built the first Taj hotel in Mumbai in 1903 because he was frustrated that he and other Indians were not allowed to enter British-only luxury hotels of the time. The company now has nearly 100 hotels in India, the United States, Australia and elsewhere.
Bank of America Merrill Lynch and the law firm Shearman & Sterling are advising Indian Hotels.
Vikas Bajaj contributed reporting.
