Marriott global, the hotel giant that operates The Ritz Carlton, Renaissance Hotels and the Marriott chain, has agreed to acquire its rival Starwood Hotels and Resorts Worldwide for $12.2 billion. The merger of the two will create the largest hotel company on the planet.
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Three-quarters of Marriott’s rooms are in the United States, while Starwood earns almost two-thirds of its revenue outside the U.S. With the brand power behind Starwood, Marriott will have a much stronger presence in markets like Europe, Latin America, and Asia.
More than 1,270 properties in 100 countries, under names that include: St. Regis, The Luxury Collection, W, Design Hotels, Westin®, Le Méridien, Sheraton, Four Points by Sheraton, Aloft, Element, and Tribute Portfolio. The companies noted that Starwood’s shareholders will be getting an additional $7.80 from the spinoff of its timeshare business, but the stock was down more than 5% at $71.12 in trading Monday. The merger “has a current value of $72.08 per Starwood share, including the $2 cash per share consideration”.
Starwood put itself on the market in April when board chairman Bruce Duncan said the company planned to explore a “full range of strategic and financial alternatives”.
Last month, Starwood announced the sale of its timeshare unit to Interval Leisure Group, with its shareholders retaining a 55-percent stake in the company.
Many frequent travellers and SPG members have also taken to Starwood’s Facebook page to air their unhappiness, with comments such as “gutted” and “I hope Marriott doesn’t tarnish what was so special about Starwood” and “Marriott and its rewards programme is a huge step down”. Following completion of the merger, Starwood shareholders would own approximately 37% of the combined company’s common stock, on a pro forma basis, using fully diluted share counts as of 30 September 2015.
The company had reached out to potential bidders InterContinental Hotels Group Plc, Wyndham Worldwide Corp and sovereign wealth funds in July.
There has been plenty of rumor and speculation in recent months about what would happen to Starwood Hotels & Resorts since its board of directors chose to look for ways to maximize shareholder value. Marriott expects to save at least $200 million in annual costs by 2018.
Lazard and Citigroup offered financial advice to Starwood, and Deutsche Bank advised Marriott.
While Starwood is smaller than Marriott or Hilton, it has more hotels in China than any other US hotelier, and an extensive operation in Hawaii.
Marriott now has more than 2,000 employees at its Bethesda headquarters.
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Starwood’s stock closed at $74.99 per share on Friday, November 13, down from $76.23 per share one year ago. “They are both extraordinarily powerful programs and we will make them more powerful and relevant”, Sorenson said.
