Orient-Express Hotels announced a major expansion of its business in South East Asia with the acquisition of the Pansea hotels group for approximately US$25 million. The transaction will be completed within the next 4 weeks, in advance of the high season which starts in August.

On May 25, 2006 the company announced its acquisition of the 50% of the Napasai property in Koh Samui, Thailand, not owned by Pansea. Acquisition of the entire Pansea company (actually a Hong Kong company called HOSIA which owns the Pansea business) will result in considerable tax savings in HOSIA in connection with the Napasai transaction.

In 2004 Orient-Express Hotels provided a convertible loan to HOSIA which was expected to convert into approximately 25% of HOSIA's equity. At the same time it entered into put/call arrangements which were expected to be exercised in 2009, resulting in Orient-Express Hotels buying the remaining 75% of HOSIA's equity at eight times 2008 EBITDA.

The company believes that the US$25 million purchase price is slightly less than ten times annualized EBITDA projected for the remainder of 2006. Also, earnings from the two Bali properties have been depressed due to the most recent bombing on the island and the Ubud Hanging Gardens property being in its buildup phase, having only opened in July, 2005.