Tatas demand apology, Orient Express on backfoot

MUMBAI/LONDON: The gloves are off! ‘The nice guys’ of Indian business, the Tatas, have bared their fangs. Angered by a missive from Orient Express Hotels (OEH), which arrogantly dismissed a Tata interest in partnership as value-destructive, the Tatas struck back and said the “OEH has an entrenched board that does not meet the needs of its shareholder base….”

While demanding an apology from OEH for making “pejorative, inaccurate and libellous” statements about the Indian Hotels group (Taj Hotels), the Tatas issued a veiled warning that they could open discussions with shareholders of OEH.

A strongly-worded statement issued by Indian Hotels vice-chairman RK Krishna Kumar on Wednesday night pointed out that “several shareholders representing a substantial number of class A shares (in OEH) continue to reach out to Taj Hotels through telephone calls, emails and approaches of meetings. To date, Taj Hotels has honourably declined their advances.” The Tatas hold 11.5% in OEH currently.

What got the Tatas’ goat was a leaked statement by Paul White, president & CEO of Orient Express, which declared: “Any association of our luxury brands and properties with your [Tata] brands and properties would result in a reduction in the value of our brands and our business and would likely lead to erosion in the premiums currently achieved by our properties.” Orient Express Hotels, Trains and Cruises is a hotel and leisure company.

Industry minister Kamal Nath weighed in on the side of the Tatas and said: “Asia is known for hospitality and it is disappointing that people do not understand this. I would urge the US government to enlighten Orient Hotels about the changing global scenario. They have to understand that today Indian entrepreneurs and intellectuals are respected worldwide and they should also do so,” said Nath.

On Thursday, OEH was on the backfoot. When DNA asked the company for a comment, a spokesperson said their comments on the Taj group’s overtures were based “entirely on a business rationale”, and they did not mean to be pejorative or racist in any way.

Realising that the letter sent by Orient Express last week to the Tatas had not gone down well in India, the luxury hotels group said it was “not ready to make any more comments on the issue at the moment”. OEH feels it may have unfairly landed in a row created by some Jaguar dealers who had made derogatory remarks about the British badge car being taken over by an Indian company.

“After we sent the letter, we realised that we have walked into a row created by the Jaguar dealers, and now the situation is so inflamed,” a senior official in OEH told DNA.

“When we spoke of the ‘Taj’s domestic portfolio’ in the letter we meant that the bulk of the Taj hotels are in India, and nothing else,” explained the official. “We have no issue with working in any part of the world and have interests in countries which are a less developed than India, but we would like to choose our business partners,” she added.

But the damage may already have been done, following Krishna Kumar’s strong riposte. Accusing the OEH management of using poison pills to “further solidify the position of its board and management to the detriment of public shareholders,” Krishna Kumar warned that “those with a fossilised mind risk being marginalised.”

The Tatas may have responded the way they did because of the negative comments that were made in their bid for Jaguar/Land Rover, which they are close to bagging.

In a comment two weeks ago, Ken Gorin, chairman of the Jaguar Business Operations Council, said sale of the Jaguar brand to Tata would raise “unique image issues”. “I don’t believe the US public is ready for ownership out of India” of a luxury car brand, Gorin said. “I believe it would severely throw a tremendous cast of doubt over the viability of the brand.”


That comment reeked of the same arrogance that greeted Lakshmi Mittal, when he made a hostile bid for Arcelor in 2005-
06. Guy Dolle, chief executive of Arcelor, dismissed his bid, saying Mittal Steel was a “company of Indians” with “less than average businesses” that would pay for Arcelor with “monkey money”. Comparing Arcelor to Mittal, Dolle said: “They make eau de Cologne, we make perfume.”

Well, the cologne guys triumphed in the end. In another day or two, we will also know whether another Indian company will take over the iconic Jaguar brand. As for whether the Tatas will bid for Orient Express, which runs a chain of luxury hotels and trains, or not, only time will tell.

“I am not sure whether they have the appetite for a hostile takeover. But it all depends on how much the Tatas believe that Orient Express can bring them synergy and not what the foreign hotel major wants.

I am sure the Tatas can get a lot of support from the UK if they plan to increase their stake, as the goodwill from the Tetley and Corus group acquisitions will hold them in good stead,” said Sanjeev Krishan, executive director, PricewaterHouseCoopers

Will Indian Hotels actually bid for the Orient? The company is vulnerable as it doesn’t have any promoter holding. Indian Hotels own 11.5% and Jumeirah Assets and Blackrock Advisors own 9.21% & 5.04% respectively.

The rest of the shareholding is evenly dispersed. Indian Hotels is better placed as it recently took precautions against predators by lowering its foreign stakeholding level to 24% while the Tatas hold a little less than 30%.

The valuations of the two warring hotel chains mirror each other. Indian Hotels is worth $2.2 billion while Orient Express is worth $ 2.4 billion. The two chains own marquee brands and properties all over the world.