Buy Orient-Express (OEH) on Potential Takeover Target -Barron's

Shares of Orient-Express Hotels (NYSE: OEH) were highlighted in this weekend's Barron's. The stock initially felt a boost from the positive mention, gapping higher by about a percent, but has since sold-off, now down $0.22, or 0.50%, to $45.86.

The Barron's article recommends buying shares of Orient-Express, which attracts "well heeled travelers" looking for "Old World opulence", as shares are now starting to look attractive down about 18% year-to-date. Barron's believes that shares of Orient-Express have already more than discounted any risk of a potential macro slowdown -- down 25% from its peak in October -- especially when considering that demand for high-end international travel destinations "remains very resilient."

The article lists recent increased activity from several savvy investors as evidence that Orient-Express could be bought out soon:

• Indian Hotels has accumulated an 11.5% stake
  
• Jumeirah Assets of Dubai has purchased 9.2% of the company at $61.78 prior to offering $60 to buy the remaining shares
  
• Steven Cohen's SAC Capital disclosed a 5.5% stake last month with an average price of $51.30 and
  
• D.E. Shaw recently boosted its stake from 5.7% to 7.6%

At the least, Barron's believes this movement of smart money has created a floor on Orient-Express shares as if the stock continues to fall, a suitor will likely step in, possibly on a hostile basis, and attempt to elect new Board members.

A deal may not be just that easy, though, according to Barron's. Current management has several fail-safes already in place in an attempt to combat potential acquirers: Orient-Express founder, James Sherwood, and his family, hold about 81% of the company's voting rights "through super voting Class B shares, each of which has 10 times the voting power of the common..." Furthermore, the company's Board also has the authority to issue preferred stock without shareholder approval. Put simply, Barron's says that such precautions have created a situation where "Orient-Express probably won't be sold until Sherwood is ready to sell, or until the board is offered a premium too rich to decline."

Orient-Express Hotels, Ltd., together with its subsidiaries, operates in the leisure market worldwide.

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