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.
Indian Regulatory Changes - My View (Indian View )
Me to
Hi Don,
I am not an expert on this topic and nor is my intension to write to you ito defend SEBI (India's version of SEC) or Indian Finance Ministry... or RBI (India's version of Fed) But let me bring out few points as I understand them.
****"Like China, however, India has an opaque and sometimes unpredictable regulatory apparatus that makes it nearly impossible for individual investors to participate in the securities markets. "****
Well, rules are not opaque but evolving... And they are specially not like China (A good article on this would be to read "Spend some, then spend some more" from Economist)
**** and with "impossible for individual investors " ****
you mean Non-Indian investors I guess. Yes thats true.. and I would say it better for them b'se unlike US & EU/UK markets, Indian markets are not mature. And, information & data on listed companies is not as pervasive or freely available as in developed markets.
Things are far better today but they still have to go a long way to meet std. which a normal individual investors from developed world would expect or is used too.
(My point is they one might burn his/her hands badly, due to lack of information, hence it blessing in disguise)
****To purchase Indian securities, individual investors are required to gain regulatory approval from the Securities Exchange Board of India [SEBI] and obtain a Foreign Institutional Investor license. ****
Yes!!! But its good for markets, all SEBI is trying to do is get more transparency on money inflows. I think it is good for Indian markets, Indian investors and Foreign investors alike. SEBI chairman him clearly stated that its not to prevent flow of funds but to get check the quality and color of the fund.
**** To discourage speculation, foreign investors incur a 10 percent short-term capital gains tax on securities sold within one year of purchase, and other transaction fees and taxes may apply before investors can return their investment proceeds to their countries of origin.****
Well, even Indian investors have to pay short and long term gain tax. And I am sure most of the countries in the world put tax on the gains made in market transaction.
****India also limits foreign ownership in certain companies and industry sectors. Once these limits are reached, a prospective purchaser must enter trades in a queue, and an order is filled only when another foreign owner sells shares.****
Yes, India as limits on max. FII holding in companies. And this cap is based on which sector that company works in. This surely is a step to prevent foreigners taking over Indian companies. It should change & I think from time to time you will see this limit been relaxed also in almost all the sectors.
I agree we should not have them, but I think Govt of India & Indian Industrial houses see it as a necessary evil. Just look at it this way...
a) What if tomorrow a Chinese Sovereign fund wants buy 70% of Boeing OR ADIA wants to buy 55% in General Dynamics?
Will we not hope US govt do something to prevent it? I hope & I am sure it will not come to it, but it will it be worthy question to ask.
b) The total market cap of NSE in 2006 was US$ 1.46 trillion while that of NYSE was USD 25 trillion (2006) nearly 1/17 of US market alone. Here we are not talking about power of other players like PE etc. I think that says why India is so conservative.
Amber Ved
in-my-own-view.blogspot.com/
From Don - Regulatory Changes Take a Bite Out of India ETN On SeekingAlpha.
With its rapidly expanding middle class and increasing global presence on the world stage, India has been one of the most popular destinations for emerging-market investment dollars in recent years. Like China, however, India has an opaque and sometimes unpredictable regulatory apparatus that makes it nearly impossible for individual investors to participate in the securities markets.
To purchase Indian securities, individual investors are required to gain regulatory approval from the Securities Exchange Board of India [SEBI] and obtain a Foreign Institutional Investor license. To discourage speculation, foreign investors incur a 10 percent short-term capital gains tax on securities sold within one year of purchase, and other transaction fees and taxes may apply before investors can return their investment proceeds to their countries of origin. India also limits foreign ownership in certain companies and industry sectors. Once these limits are reached, a prospective purchaser must enter trades in a queue, and an order is filled only when another foreign owner sells shares.
To address some of these obstacles and satisfy investor demand for access to India, Barclays Bank, sponsor of the iShares family of ETFs, launched the iPath MSCI India Index ETN (INP) in December of 2006. This month, we begin regular coverage of this fund in our ETF Report. This exchange-traded note, a debt instrument that trades like a stock on the New York Stock Exchange, tracks 62 Indian companies across the ten GICS industry sectors. Financials (27.44 percent), energy (18.83 percent) and information technology (14.54 percent) were the most heavily weighted sectors as of September 28, the latest date for which complete information is available.
While India has become a haven for business services outsourcing and boasts a handful of globally recognized IT firms—including Infosys (INFY) and Tata Consultancy Services—it is still very much a developing economy. India’s health care and consumer discretionary sectors, for instance, account for relatively small slices—3.42 and 5.14 percent, respectively—of INP’s net assets. Industrials (11.09 percent) and materials (7.09 percent) make up a far larger share of this fund. By contrast, health care stocks represented 11.64 percent of the S&P 500 as of September 30, and consumer discretionary accounted for 9.23 percent of the broad-based U.S. equity benchmark.
Since shares of INP debuted, they have more than doubled in value, and they peaked at a new closing high of $116.30 on January 14. Part of that gain simply reflects the rapid growth of India’s economy, which expanded at an average annual rate of 8 percent over the past three years, one of the fastest growth rates in the world. According to the International Monetary Fund, India’s economy is the world’s fourth-largest according to a measure favored by economists, called purchasing power parity, the nominal exchange rate at which a given basket of goods and services would cost the same across various economies. Only the United States, China and Japan rank higher.
More recently, INP has been trading at a hefty premium relative to its daily indicative value—essentially the value of the underlying index, less fees—leading some commentators to describe the fund as “broken.” The reason for this is complicated and has to do with an attempt by India’s securities regulators to avert a stock market bubble by stemming the rising tide of foreign investment.
In October, the Securities and Exchange Board of India announced its intention to bar foreign investment firms from issuing derivatives based on Indian securities. The rapid run-up in the value of India’s stock market and intense interest by foreign investors prompted the ruling.
In response, Barclays suspended issuance of INP shares from its inventory on Friday, October 26, and shares spiked 14.5 percent during the following Monday’s trading. The SEBI clarified its position one week later, and when Barclays announced on November 5 that it would resume issuing shares of INP from its inventory, the price of the notes fell 13.4 percent in the space of five trading days. Even before this event, the fund’s annualized standard deviation was 23.94, more than twice that of the S&P 500 and seven points higher than that of the MSCI Emerging Markets Index.
To many investors, it may have appeared that the situation in India was temporary and that Barclays would begin issuing new shares of INP in short order. So far, that hasn’t happened. On December 7, Barclays acknowledged that there was no end in sight to the “limitations on issuance, sale and lending” caused by the SEBI’s decision. The result, according to the fund sponsor, was that INP could trade at a premium to its underlying value into the foreseeable future. The latest chapter in this saga opened on January 15, when Barclays announced it would resume lending INP shares from its inventory—presumably for investors who want to sell the fund short—but would maintain its suspension on the issuance and sale of new shares.
While INP has certainly been a good investment for those who purchased it before the regulatory decision that effectively shut down the creation of new shares, its pricing history reveals the risk inherent in investing in emerging markets. In the wake of Barclays’ latest announcement regarding INP, the price has fallen around 29 percent. The problem for investors—even the most diligent do-it-yourself researchers—is that difficult-to-predict regulatory changes and not fundamental factors caused these fluctuations. Although these kinds of risks are in some ways par for the course in the rapidly expanding securities markets of India, China and Vietnam, they can easily catch Western investors off guard.
Don Dion
From::::
http://seekingalpha.com/article/63876-microsoft-s-last-big-beat-internet-domination-or-death
01:09 PM
Mon Feb 11th
Hi Dennis,
I understand that IBM & others spend a lot on Linux. Hence technically can not be called cheap or free. But when it come to user it is almost free and hence from Microsoft's end of the telescope it is free. And hence a hard nut to crack. It is a proxy war in which Microsoft cannot point & shoot one company.
And also I do not doubt that Microsoft is not gonna use open source in future.. b'se it a movement which is real and can not be ingnored.
But I think more bigger movement, is in Internet technology space. Hence my whole idea of my blog was to bring to the point... that one should reads between the lines here and recognize that MSFT has come in open now with its understanding that it is ready to take bold measures, to get into the Internet space in big way.
With great powers come great responsibility. And I think Yahoo is lucky to be in position it is in, but sadly they do not recognize what it means to be YAHOO!!
Amber Ved
Dennis Byron (Research 2.0)
06:57 AM
Sun Feb 10th
At Research 2.0, we agree with your conclusion that Microsoft understands the information technology market situation well and is acting agressively to take advantage. I even go further and believe that Microsoft is uniquely positioned--because of its combination of enterprise and consumer computing experience--to stay well ahead of Oracle, SAP, IBM and Google in the enterprise category. Apple is a real threat on the consumer side and Yahoo will get Microsoft where it needs to get to respond on the consumer side faster than building something from scratch.
I caution you on your underlying assumption about Linux being developed "at almost no cost" however. IBM, Intel, Novell, HP, Fujitsu, EMC, Oracle, Sun, Motorola, and all the other sponsors of the Linux Foundation (LF) as well as many that work on Linux without belonging to the Foundation have spent billions on maintaining and updating the Linux kernel both in cash and in-kind contributions to the development effort.
If "low-cost Linux" is at all key to your conclusion, be careful. In fact, I believe relatively soon, Microsoft will become--along with Google--one of the largest users of Linux, thanking the LF profusely as it makes that transition.
Cost of a House?
I think MSFT+YHOO is not only about search. Yes, search appears to be the the no#1 thing today. But it is about cloud computing in total. Its about all services over Internet which one can monetize.
No points guessing that cloud computing is where technology is headed & search is only the doorway. But the final price is never for the door its for the entire house. If your address is well known like White House, or 10 Downing Street you will get the great price. By that what I mean is just look at Ebay or Amazon for example if one has to shop online we hardly go to Google b'se we know what Amazon what keeps in store.
So in my mind MSFT has recognized this. And from Yahoo all MSFT needs is few well known services, web traffic & the BRAND which make me wonder if MSFT is ready or getting ready with some important services to challenge the growing power of Google and might need brand like Yahoo to make the best of the products.
Yahoo + AOL -> Recipe for death?
In the most unexpected turn of event Yahoo tries to tie a knot with AOL to do away with MSFT!! I can help but feel amused by this idea. It would be the most bizarre way of claiming that we are gonna revive Yahoo. Saying or writing anything against this idea would not be enough. Expect that, if this is what Yahoo Management is thinking of doing... I as an investor will exit the stock right now. (It only shows that convoluted thinking at Yahoo's management level)
AOL is now a company, which no one (including Times Warner & AOL itself) know what to do about it. As it looks for now, it would be a perfect recipe for Yahoo to committing suicide. Or may turn out be an attempt of not only delivering Yahoo but also AOL to Microsoft in future.
For the heck of it ask, lets ask this question.... What does AOL has which Yahoo do not already have. (O Ya Google's search engine). Anyone in his sense, would have understood (or might attempted to understand) management claims like that Yahoo can be revived on its own; that Microsoft offer under-values Yahoo; that Microsoft will hurt Yahoo as a brand; that Microsoft will not play fairly in the market after it takes over Yahoo; Or that they are ready to try out something with Google etc.
How does getting AOL into the picture will not help. I think if they try to do this all they will do is weaken both themselves and AOL. B'se
1) leaving Google unchecked will continue to help it gain market share and also making it impossible from FTC to allow any Google/Yahoo+AOL merger etc happen.
2) Will reduce there earnings future and increase the expenses.
3) Give Microsoft make more money from its OS & s/w's
With money & time and business conditions on its side Microsoft can wait for some more time during which Yahoo+AOL marriage fails to meet Google's power and Microsoft cont. making more profit adding it to its cash reserve making it easier for them.
Race for Yahoo!!
What can 44.6Billion USD could mean? Well, for Microsoft it can mean the cost of survival.
But this bid for Yahoo, make one wonder, Why don't Microsoft buy some new companies in place of dying Yahoo? Would 44.6$ not enough to create a parallel and better Yahoo? Will the much needed integration even possible? Will Microsoft play by rules if it gets Yahoo? Many more such questions would get answered in next, weeks to months as the Microsoft's Yahoo bid plays out. But the most important question of all, would take much longer to be answered. Will Microsoft be able to turn the table on Google or will it get tangled into the web its trying to spin? Irrespective of the outcome, one thing is clear that Microsoft, is ready to take the bull by it horn.
Currently Microsoft has 3 major problems going against it
1) Battle with Google - Gateway to the Internet.
2) Gorilla-war with Apple - Next generation devices & better software integration
3) Skirmishes with Linux - Developed by best brain and at almost no cost.
Probably this is one of the most difficult times Microsoft had seen. All the 3 combined together where eating Microsoft from 3 different direction and could have put Microsoft money machine out of gas. But, a successful bid for Yahoo alone can turn the tide in favor of Microsoft.
Given all the troubles Microsoft has, it has 3 things going for it.
1) Huge cash reserve - An arsenal, giving upper hand in almost all battle conditions
2) Bumper Profit for next few years - Effective firepower against all kind of war games.
3) Time/situation - Market for current product, and above all monopoly of Google and dismal state of Yahoo. (Almost) taking out regulators & Google indirectly out of the equitation while limiting options for Yahoo.
Current offer for Yahoo, bring out the point that Microsoft is getting ready for the direct and decisive battle against Google. Microsoft now appears to understand the rules of engagement much better than previously assumed by may including Yahoo/Google/Apple/Linux and share-holders/Investors of various companies. Yahoo's pathetic display and lack of ability to capitalize of opportunity has given Microsoft chance of a life time. This bid will allow Microsoft a platform and big & critical internet presence which it lacked till date to take on the heavyweight-n-worth opponent.
With Windows-Vesta out & generating enough cash for Microsoft to go about doing regular business. Decision of taking on provocative Apple or multi-brain-super-cheap Linux would have been costly and a zero sum game. A big 44.6B-$ bid clearly shows that Microsoft also see the paradigm shift in computing as well as other see it. And that it understands the shift towards cloud computing is much more real than anything else. Microsoft management should get full credit for identifying real and avoiding needless battle and also of taking a bold decision.
Microsoft, appears to be asking the right question & getting correct answers for now. The bid decision bring out the fact that Microsoft is ready for do or die battle. If Microsoft bid for Yahoo goes through, it will drive out most of Microsoft's cash but than probably is worth buying Microsoft a fighting chance instead letting it die a slow death. And with Microsoft(+Yahoo) and Google face to face, the final showdown promises to bring out faster technological development & probably better returns to respective share holder.
So let us all say, "Microsoft race for Yahoo!!!"