The merger is a combination of two hotel chains that were, previously, rivals.
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Although the deal has been formalised, it is expected to finally close in mid-2016.
With this tie-up, the merged entity will own or franchise more than 5,500 hotels with 1.1 million rooms worldwide.
See Tuesday’s Arkansas Democrat-Gazette for full details.
With Marriott, Starwood gets to join one of the most diverse – and therefore, one of the best-positioned – hotel companies in the world, while investors get a slice of a more highly valued stock and with low risk to the deal closing.
“Our success has been driven by our ability to anticipate market shifts and meet those changes head on”, Marriott Chief Executive Arne Sorenson, who will lead the combined company, said on a conference call on Monday.
There has been plenty of rumor and speculation in recent months about what would happen to Starwood Hotels & Resorts since its board of directors made a decision to look for ways to maximize shareholder value. Furthermore, Marriot plans to keep its headquarters in Bethesda, Maryland.
“We have been in the business for a long time but Starwood is more global than Marriott is”, Sorenson, said.
Starwood derives almost two-thirds of its revenues from outside the US, and hence, the proposed merger would offer Marriott an enlarged presence in markets outside the U.S.
The deal would solve the big question mark that has been looming over Starwood for almost a year.
“The driving force behind this transaction is growth”, Sorenson said in a written statement.
Based on Marriott’s 20-day VWAP ending 13 November, 2015, the merger transaction has a current value of USD72.08 per Starwood share, including the USD2 cash per share consideration. Starwood shareholders would own approximately 37 percent of the combined company’s common stock. That, combined with a lack of revenue growth (its sales are projected to climb less than 2 percent next year, versus an estimated 8 percent gain for Marriott), has put Starwood at a disadvantage.
Three Chinese firms reportedly had been vying to take over Starwood: hotel giant Shanghai Jin Jiang worldwide Hotels, sovereign wealth fund China Investment Group and HNA Group, parent company of Hainan Airlines.
TheStreet’s Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio noted on CNBC’s Squawk on the Street this morning that the deal undervalues Starwood stock.
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Executives also emphasized it expected to reduce costs through the merger, and benefit from economies of scale, language which generally suggest a few service and job cuts in areas were they are now duplicated by both companies.
