Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of hospitality specialist Orient-Express Hotels (NYSE: OEH) shot up as much as 42% today after Indian Hotels (IHCL) offered to buy out the business for $12.63 a share.
So what: That premium represents a steep markup, 41%, from where shares closed yesterday. The stock climbed as high as $12.75 before stabilizing near the $11 mark, still representing more than a 20% gain. IHCL, a division of the Tata conglomerate, already owns about 7% of Orient-Express, which has 40 hotels, six luxury trains, two cruise ships, and a restaurant under its control. According to the terms of the offer, Orient-Express would remain an independent operator while IHCL would assume its target's $529 million in debt.
Now what: It's hard to argue with a buyout offer, especially one that pumps up the stock this much, but it's unclear whether management will accept the offer. IHCL has expressed similar ambitions in the past, but in 2008, Paul White, the former CEO, said such a deal would not be "a strategic fit." Tata, which operates in a wide range of industries, has pursued a number of similar acquisitions to expand its global reach. Orient-Express shareholders may want to take the money and run as the hotelier's profits have been slim, if any, recently, and revenue is actually predicted to shrink this year.
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