The bid may prove to be the last bold act by Tata group Chairman Ratan Tata before he retires at the end of this year, and marks a rare hostile approach from an Indian company.
The scion of the Mumbai-based Tatas, India's most prominent business family, has built the software-to-steel conglomerate into the country's biggest business house through a series of large overseas acquisitions.
But the group has a mixed record on deals, and investors greeted the offer for Orient-Express, priced at a 40 percent premium, with wariness. Indian Hotels would also assume Orient-Express debt,
about $530 million at the end of June.
Indian Hotels has bought several overseas properties, including the Pierre in New York, but they have not tended to perform as well as its domestic operations, which include its flagship Taj Mahal Palace in Mumbai.
"Generally, acquisitions for Indian Hotels have not been rewarding for the company," said Niraj Mansingka, an analyst with Edelweiss Capital in Mumbai.
Orient-Express owns a global portfolio of properties including the Hotel Cipriani in Venice and the 21 Club in New York, but its heavy exposure to the sluggish European economy has crimped growth.
"It seems clear to us that (Indian Hotels) wants to position itself as a global hospitality chain," JPMorgan analysts wrote.
Indian Hotels was rebuffed in an attempt to strike an alliance with Orient-Express in 2007, and again in August.
In its $12.63-a-share takeover bid, Indian Hotels has secured the backing of the former CEO of Orient-Express, Paul White, and Luca Cordero di Montezemolo, chairman of Italian sports car maker Ferrari and a close friend of Ratan Tata.