Terming as "unproductive" the public dialogue between Indian conglomerate Tatas and Orient-Express, a key investor has asked the US-listed luxury hotel chain to come clear on its corporate governance structure.
Activist hedge fund DE Shaw Valence, which has garnered a 5.7 per cent stake in Orient-Express, also warned that it reserved its rights as shareholder to take appropriate actions, if the firm did not address certain issues, including a lack of clarity on voting rights that might be hindering interested parties from making merger or acquisition offers.
DE Shaw Valence has accumulated the stake through various transactions over the past few weeks for about $ 135 million, which followed a public spat between Orient-Express and Tata group's Indian Hotels late last year triggered by a business combination proposal made by the latter.
In reply to Tata Group's proposal, OEH CEO Paul White had said that an alliance with a predominantly domestic Indian brand would erode the premium brand value of Orient-Express.
This was followed by Indian Hotels Vice Chairman R K Krishna Kumar seeking a public apology for using "libelous" remarks while rebuffing the alliance proposal.
DE Shaw said in a regulatory filing in New York that it would review its investment from time to time, after which it may purchase or sell shares or even engage in "a transaction with the purpose or effect of changing or influencing the control" of the company.
In a letter addressed to the Orient-Express board, DE Shaw Valence said, "As shareholders of OEH, we have become increasingly concerned by the public communications between the company and Indian Hotels. The continuation of this unproductive dialogue threatens to impose substantial costs on all shareholders."
"To address the root cause of this problem, which we believe lies in widespread confusion regarding the company's corporate governance structure, we strongly encourage the board to immediately and publicly clarify the rights of the company's Super Voting Class B shares and how the company intends to use these shares in the event a fair and equitable offer for the company as a whole is received," DE Shaw said.
The fund also asked OEH to specifically indicate whether or not the owners of the company's Class A shares would have a "definitive and binding vote regarding a merger or sale of the company should such a proposal be made. The lack of clarity on this point may be hindering interested parties from submitting proposals and is creating an unnecessary and significant valuation discount."
While asking for a "satisfactory clarity on this issue," DE Shaw said that "should the company fail to respond adequately to our concerns, we reserve our rights as shareholders to take any actions we may deem appropriate."
DE Shaw Valence is the second major hedge fund to disclose a large holding in Orient-Express in the recent past. BlackRock, one of the largest hedge funds in the world, had recently disclosed a 5.2 per cent stake in the company.
OEH has put in place a defence mechanism against any hostile bid while restricting anyone from picking up more than 15 per cent of its Class A shares. Indian Hotels hold an 11.5 per cent stake in the company, while other major shareholders now include DE Shaw, BlackRock Advisors and T Rowe Price.
The company is widely expected to comment on issues raised by DE Shaw as well as Tatas later this month when it announces its fourth-quarter results on February 26.
Earlier last month, Bermuda-headquartered OEH had announced a quarterly dividend of 0.025 dollars a share to be paid to the Class A shareholders of the company.
