Hedge funds push for Orient board seats

Date: Wednesday, November 26, 2008
Author: Telegraph India.com

Mumbai: The battle between the disaffected shareholders of Orient-Express Hotels — the Bermuda-based hotel giant — and its management over its controversial corporate governance structure has started to escalate once again.

Less than two weeks after Orient-Express announced plans to come out with a fresh issue of Class A shares which are listed on the New York Stock Exchanges, two leading hedge funds have come up with a new magna carta of demands to end the year-long skirmish.

The hedge funds have been orchestrating the attack on Orient-Express’ governance structure that ensures the management’s “self-perpetuated control over the company” and trammels the rights of outside shareholders.

The funds led by financiers David E. Shaw and Steven Cohen have come to the forefront after the Tata-owned Indian Hotels Company — the single largest shareholder in the company — receded into the background last December following the Orient management’s rebuff of an overture for a global alliance.

In a letter written on November 21 to the Orient management, the hedge funds said they were ready to end their shareholder activism if the management agreed to scrap the super-voting Class B shares, ensured only one-third of the current board members would seek re-election at the next three annual general meetings till 2011, and allowed the “outsiders” to have their own slate of directors.

They have also suggested that they would pick a new director candidate who would join a new committee along with two other non-executive members of the existing board “to evaluate strategic alternatives for the company, including the possible engagement of an investment banking firm for that purpose.”

This committee would submit its report to the board of directors before the AGM in 2009. The Orient management would have to agree to hold the AGMs at around the same time as the one held in 2008 — which was in June. The hedge funds said if the management rejected their plan – as managing director Paul White has already done – they would pursue legal options.