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Orient Express Hotels on Thursday rebuffed Indian Hotels' $1.8-billion takeover offer, saying the proposal "significantly undervalues" the company.


In a letter addressed to Indian Hotels vice-chairman R K Krishna Kumar, Orient Express chairman J Robert Lovejoy said that after thorough consideration, and in consultation with independent financial and legal advisors, the board has unanimously concluded that the proposal significantly undervalues Orient Express and its future prospects and that now would be "a highly disadvantageous time to sell the company".

Lovejoy was responding to Krishna Kumar's October 18 letter that sought to acquire all the outstanding shares of the British chain at $12.63 a piece in cash.

Indian Hotels holds about 7% in the NYSE-listed company, which owns ultra-luxury properties like Hotel Cipriani, Copacabana Palace, the Venice Simplon-Orient Express and the 21 Club. This is the second time that Orient Express has turned down Indian Hotels' proposal. In 2008, Indian Hotels had approached the hotels to cruises operator for a strategic alliance. Indian Hotels had acquired initial stake at $58 per share four years ago.



Indian Hotels has teamed up with Ferrari chairman Luca Montezemolo and former Orient-Express CEO Paul White to launch the latest bid.

"They continue to state publicly that the offering is a significant premium, but  opportunistic proposal was made at a time when the price of Orient Express shares has been significantly depressed, the current macroeconomic environment and conditions in the luxury hotel business would make this a highly disadvantageous time to sell the company to realize its true value. "Like that of many other hospitality companies and luxury sector participants, we believe the current price of Orient-Express shares reflects the market's short-term outlook and not the long-term value of its assets," Lovejoy, also a long-standing shareholder of Orient Express.

Orient Express clocked a profit of $18 million in the third quarter of 2012 compared to a loss of $50 million in the year-ago period. Lovejoy said that the opportunity for the company to grow its earnings and cash flow remain significant as some of its properties undergoing renovations will reopen and the new properties will commence operations. Orient Express has appointed John Scott III as president and CEO of the company.