Hedge Fund Owners Want To Scrap Dual Ownership At Orient Express

By Pallavi S

  • 28 Aug 2008

The battle for control of luxury hospitality chain Orient-Express Hotels is entering a new phase. After the management of the firm rebuffed separate takeover proposals from two of its biggest shareholders Tata's Indian Hotels (the single largest shareholder of Orient Express with an 11.5 percent stake) and Dubai's Jumeirah Assets, now two big hedge funds are jockeying to redesign the firm's ownership structure which would facilitate (knowingly or unknowingly) a takeover bid.

According to a New York Post report, and an earlier Telegraph report, billionaires Steven Cohen and David Shaw-led mega hedge funds CR Intrinsic and DE Shaw, who own 14.3 percent of Orient Express, together have called for a special meeting so that shareholders can vote to dissolve the company's dual-class ownership structure. This dual-class shareholding structure has allowed the management to stave off overtures from possible acquirers.

Early this week the funds proposed two changes to the company's bylaws that would lead to elimination of all of its super-voting Class B shares, which are controlled by several members of Orient's board of directors including founder James Sherwood. Incidentally, unlike other dual-class voting structures, the directors who control the Class B shares actually own less than 1% of the company. However, despite this by virtue of the dual-class ownership structure they have been holding back any forceful bid for Orient Express.


The firm's management is now reportedly looking to fight off the proposed changes by challenging the funds' right to call a special meeting under Bermuda law.

According to New York Post, DE Shaw and Intrinsic have stated that if the board does not proceed to convene the shareholder meeting within 21 days, the members of the group intend to hold the meeting themselves and plan to solicit proxies in favour of the resolutions to collapse the dual-class ownership structure.

Both Jumeirah and Tatas made a public offer at $60 a share early this year, but were rebuffed by Orient's management. The issue took a controversial turn when the Orient management made some disparaging remarks against Tatas' Taj brand.


However, since then, Orient's stock has nearly halved as prospects of a takeover looked bleak besides economic slowdown has brought out concerns over consumer spending.

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