The flux around OEH stock is growing by the day. With Steven Cohen’s SAC investment firms filled SC13G for 2 consecutive days, taking their holding from 5.4 to 14.5 to 22.3%. A gain of 9.1 & 8 on over two days thus making Steven Cohen funds the top holder of OEH. It also hint at possible exit of some other institutional players.
Steven Cohen Funds
22.3
Indian Hotel
10.84
Dubai Holding
8.69
BlackRock
5.2
DE Shaw
5.7
As of what it known today, top 5 holders of OEH Class-A share now own more than 50% of OEH. Among these top 5 players, 2 companies (Dubai Holding & Indian Hotel ) interested in taking over OEH, while other 3 are well known hedge fund making OEH a perfect M&A play. But, what make the situation even more interesting is the vehement & candid opposition of OEH management towards any takeover or tie-up proposals and position pill structure which it has put in place to avoid any hostile takeovers. Let us look at 4 parties (OEH Management, Hedge Fund, Dubai Holding, Indian Hotels) who hold very interesting cards of the game
Even as over the years OEH management has done excellent job of creating unparalleled brand in hospitality sector. OEH management for now seems to have been caught on the wrong footing. OEH Management refusal to come on to the table for any sort of discussions have not gone well with retail investors, while the poison pill structure created by OEH is also inviting wrath from any of the top hedge and institutional players wait to unlock the value of OEH brand.
OEH is currently trading at outlandish 51 times it current price to earnings ratio. This might make normal institution and Mutual fund investors vary. If it was not for all the M&A buzz around the stock it would have been trading at a far lower valuation. This is perfectly, why one might see exit of Mutual funds and normal investors and entry of Hedge funds like SAC and DE Shaw who believe that there might be good short term upside due to a possibility of multi party M&A processes only if they can get OEH management to get on the table.
Dubai Holdings has already indicated that it will consider offer of 60USD for OEH if any 3rd party makes a takeover bid. What make Dubai Holding a great player in the arena is its very deep pocket, by been investing arm of super rich Dubai government. With deep pockets it will not only be able to match any rivals in M&A but will also be able spend handsomely in future if required. Dubai holding might see OEH hotels as perfectly complement to its current hotel business, which are symbol of luxury and extravagance like Jumeirah Hotel.
Compared to other Indian Hotels is relatively smaller player in the game and has been rebuffed couple of times before by OEH Management for its audacious moves on seeking tie-up with OEH. Indian Hotel is one of the best managed and profitable hospitality chains across the world. Its current holding o gives them a good platform to take active part in OEH M&A. Indian Hotel is back Tata group. If other Tata group companies aspirations and killer instinct are any indicator, Indian hotel will and can match any offer from Dubai holding. And even if they losses battle for OEH, it will still allow them to make profit on its current investment in OEH (For now which is a loss making loss making deal).
Whichever way the cookie crumbles it would be a great watch and might actually give out good returns to current stock holders.
Oriental Express plot thickens
The making of India's GE
Since early years under Thomas Edison to this day with Jeffrey R. Immelt, General Electric (GE) has been one of the most important company throughout US industrialization. GE's has rich corporate history & is a very big conglomerate with business from Media, to Commercial Finance, to Consumer Finance, to Healthcare, to Industrial, to Infrastructure. All this enable it to develop, manufacture and market a variety of products which range from aircraft engines to cutting edge health care systems to electricity. These capabilities & successes with world class management, sincerity towards corporate citizenship has always kept it as the worlds most admired company.
If someone looks at Indian corporate today, one can't help but notice the striking similarities between GE and Tata Group. Since Jamsedji Tata, Tata group has been in the fore front of Indian economic landscape. Tata's as a group undoubtedly enjoy number uno position among India corporate houses. They have businesses interest from Telecoms to automobiles; Software’s to cements, Investments to hotels, Tea to Steel. Just like GE, Tatas also command respect not only because of been a big industrial house but also because of been agents of change in India and for people of India.
But there is one striking difference between the two, GE is a much bigger corporate compared to Tatas. Slowly but surely this difference is also fading. With Mr. Tatas’ current push towards taking his group companies to top position can not be overlooked or overstated. The seeds of change and desire to be top global companies can now be seen in all Tata group compaines.
Tata Steel is now world 5th largest steel company thanks to acquisition of Corus; with brands like Tetley & Good Earth Tata Tea is second largest branded tea player globally; Tata Motors with Nano and Indica car design under it belt is taking a shot at JLR; Indian Hotel is also gunning for tie-up with Oriental Express Hotel to be a player in hospitality sector. TCS is already India's number one (and hence worlds) top s/w outsourcing company having big plans in area of business consulting, engineering design services & KPO/BPO sectors.
Tata group companies have changed at remarkable pace in last coupled of year. The shift is not only in the range (local to global) or sectors (traditional to high growth) but also in the manner in which they operate. Tatas are changing from been a slow paced business house to fast & much more nimble corporate. The aim of Tata group has changed from been best in India to been among the top players in the world.
To achieve this, they are changing their old conservative business approach for new.
Tatas now seem to be ready to play the game by the new rules. From solely replying on internal resources and its own reserves, cashflow for growth, they are ready to take a shot at top slot using much higher leveraged positions external debts and tie-ups. All this change might actually look risky especially in current times of financial turmoil, but if successful will give India its own General Electric soon and later.