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Tatas sell 5.1% of luxury hotel chain Belmond for $50 mn

01 July, 2016

Indian Hotels Co Ltd, the firm behind Taj Hotels, has sold 5.1% stake in Belmond Ltd, the firm that ran an international chain of luxury hotels under the Orient Express banner before it was rebranded, for $49.5 million (Rs 335 crore).

The Tata Group firm said on Friday the money would be used to repay debt.

Its investment holding unit Samsara Properties continues to hold 0.44% of the Class ‘A’ Common Shares of Belmond.

Early this year it had sold 1.24% stake for $ 11.96 million.

This comes two and half years after Tata Group’s flagship hospitality firm decided not to pursue further its takeover bid for the luxury hospitality chain then known as Orient-Express Hotels Ltd.

This follows a rejection of the bid by the board of Orient-Express Hotels which had communicated its inability to consider IHCL’s offer as it reckoned it was not an opportune moment for them to consider a sale of their company.

This in turn came a year after IHCL made an unsolicited bid to buy 93.1% stake in Orient-Express Hotels for $1.2 billion even though it would not get a management control, given the dual shareholding structure of the NYSE-listed firm. The takeover would have also included assumption of Orient-Express’ debt taking the enterprise value of the deal to $1.8 billion.

IHCL had picked a minority stake of Orient-Express, which was acquired by the firm in stages during 2007 and 2009. It started buying shares at the peak of the market as a first step in a possible takeover bid nine years ago.

It had signed an agreement with Montezemolo & Partners, an Italian firm owned by the Montezemolo family who is the manager of Charme II Fund, which was to hold a minority stake in the special purpose vehicle (SPV) set up for the transaction.

IHCL had then offered to buy the Class A shares it didn’t own at $12.63 a piece, 40% premium to the scrip’s market price then.

Although Belmond’s share price has gained some 20% in the last six months, at $10.1 a share it is still way off from what Tata had offered to buy it for.

Tatas had originally gained exposure to the firm at around $50 a share. It had, thereafter, brought down the cost of acquisition by subscribing to more shares in 2009 which shrunk the average cost of purchase.

It sold the shares at under $10 each.

Belmond management, which had previously rebuffed IHCL’s attempt to strike a strategic alliance, holds Class B shares of the firm which have many times the voting power of Class A shares, making it virtually impossible to make a hostile or unsolicited attempt to take over the management of the firm.

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Tatas sell 5.1% of luxury hotel chain Belmond for $50 mn

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