Orient-Express Hotels Ltd. formally rejected an unsolicited takeover bid by an arm of the Tata Group of India, criticizing it as undervalued and ill-timed.
It also named a new chief executive, John M. Scott, who would replace the company's outgoing leader.
The formal notice sets up a potential battle over control of Orient-Express, an operator of high-end hotels, cruises and restaurants like the 21 Club. The Tata unit pursuing the takeover offer, Indian Hotels, is seeking to buy the 93 percent of Orient-Express that it doesn't already own.
In a letter to Indian Hotels, Orient-Express said that the takeover bid of $12.63 a share was not in its shareholders' best interests.
“You continue to state publicly that you are offering a significant premium, but your opportunistic proposal was made at a time when the price of Orient-Express shares has been significantly depressed,†J. Robert Lovejoy, Orient-Express' chairman, wrote in the letter.
In stead, Mr. Lovejoy argued that the company was on a path to lift its stock price by finishing renovations and banking on an economic recovery. Orient-Express has already seen an increase in advance bookings for next year, he added.
Moreover, the company views the Indian Hotels offer as too low relative to what other properties in the luxury hotel market have fetched. While the Four Seasons Hotel in Manhattan has reportedly drawn a takeover offer worth some $2.4 million per room, the company values the takeover bid at less than $700,000 per room, according to a person close to the hotelier.
“Our board has unanimously concluded that your proposal significantly undervalues Orient-Express, and that now would be a highly disadvantageous time to sell the company,†Mr. Lovejoy wrote.
He also pointed to the hiring of Mr. Scott, formerly the chief executive of Rosewood Hotels and Resorts, the privately held owner of the Carlyle Hotel in Manhattan.
Mr. Scot t was previously a managing director of acquisitions and asset management at Maritz, Wolff & Company and an executive at the Walt Disney Company.
A representative for Indian Hotels was not immediately available for comment.
Shares of Orient Express slumped nearly 8 percent in midday trading, to $10.94.
Orient-Express is being advised by Deutsche Bank, Goldman Sachs and the law firm Davis Polk & Wardwell.
