The combined business will franchise or operate over 5,500 hotels with over 1.1 million rooms across the globe.
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Starwood shareholders will receive 0.92 Marriott Class A shares and $2 in cash for each Starwood share, the companies said on Monday.
“The economies of scale really matter in the lodging business because higher volumes on the reservation system can drive business to less-occupied properties on a given night”, James Corl, a managing director at real estate private equity firm Siguler Guff & Co., said before the deal was announced.
The W Hotel, owned by Starwood Hotels & Resorts Worldwide, is seen in New York’s Times Square.
Last month, ValueWalk covered a report from CNBC indicating that Hyatt Hotels was in advanced discussions to acquire Starwood Hotels and Resorts Worldwide.
J.W. Marriott, Jr, chairman of the Maryland-based company, said: “We have competed with Starwood for decades and we have also admired them”.
Sorenson agrees and believes uniting the two companies will create value and improve competitiveness in a consistently changing market.
Starwood’s brands will join such Marriott’s 19, which include The Ritz-Carlton, Residence Inn, and Courtyard.
Once combined, Marriott and Starwood would boast over 75 million members in their loyalty programs.
“To be successful in today’s marketplace, a wide distribution of brands and hotels across price points is critical”, said Adam Aron, acting chief executive at Starwood. The timeshare transaction should be complete prior to the Marriott-Starwood merger closing. In addition, he said, Marriott was attracted to Starwood’s global reach and appeal, including its rewards program, to young travelers.
The announcement comes more than two weeks after Starwood spun off its time share business, Vistana Signature Experiences, and merged it with a subsidiary of Interval Leisure Group. However, Marriott expects to save $200 million in annual cost during the second year after closing. Together, the companies have brought in over $2.7 billion in revenue over the past 12 months (as of September 2015).
The acquisition, which requires shareholder and regulatory approval, has a current value of $72.08 per Starwood share, including the $2 cash per share consideration; and is expected to close by the middle of next year.
Mr. Sorenson will remain the CEO and president of Marriott, and the headquarters will be in Bethesda.
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Both the hotel groups agreed on the deal on Monday, surprising other big hotel chains that bid in the process such as Hyatt Hotels Corporation, InterContinental Hotels Group and a few Chinese companies.
