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JOCKEYING FOR ‘21’

By
Zachery Kouwe
Published Aug. 27, 2008, 9:54 a.m. ET

Two big hedge funds, run by billionaires Steven Cohen and David Shaw, tightened their grip on Orient-Express Hotels yesterday in an effort to get the Bermuda-based owner of the famous ’21’ Club to eventually put itself up for sale.

The two funds, CR Intrinsic and D.E. Shaw, which own a combined 14.3 percent of Orient’s shares, have called for a special meeting so shareholders can vote to collapse the company’s dual-class ownership structure, which is standing in the way of a possible takeover.

In a letter sent to Orient’s board of directors on Monday, the funds introduced two proposed changes to the company’s bylaws that would essentially eliminate all of its super-voting Class B shares, which are controlled by several members of Orient’s board of directors including founder James Sherwood.

Unlike other dual-class voting structures, the directors who control the Class B shares own less than 1 percent of the company.

The high-end hotel owner, which counts the Cipriani in Venice among its properties, is expected to fight off the funds by challenging their right to call a special meeting under Bermuda law.

But if D.E. Shaw and Intrinsic can eliminate the super-voting shares, they will have a stronger hand in pushing Orient to put itself up for sale.

The company’s two largest shareholders, Tata Group of India and Dubai’s Jumeirah Assets, have both bid for the company and sources say they remain interested.

Last September, Dubai made a public offer at $60 a share, but was rebuffed by Orient’s management including CEO Paul White.

Since then, Orient’s stock has fallen by nearly 50 percent as takeover prospects diminished and investors fretted about the downturn in consumer spending.

Shares closed up 1.4 percent to $34.57 yesterday.

Tata Group, which owns the Taj group of luxury hotels, including The Pierre in New York, also made a bid of around $60 a share but was rebuffed, according to people familiar with the bid. Tata, whose automotive unit recently acquired the Jaguar and Land Rover brands from Ford, is Orient’s largest shareholder with an 11.5 percent stake.

In an effort to get management to the table, Tata tried to strike a strategic alliance with Orient, but was again rejected by management, which also made disparaging remarks about the Taj brand. That prompted Tata’s Vice Chairman R.K. Krishna Kumar to demand a public apology. Orient then called the move “bizarre.”

In May, White said there had been no recent discussions between the company and Tata.

D.E. Shaw and Intrinsic said in their letter 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.

They also said they plan to solicit proxies in favor of the resolutions to collapse the dual-class ownership structure.