Starwood Hotels & Resorts Worldwide Inc (HOT) was Downgraded by Raymond James to ” Mkt Perform”.
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Marriott International could very well increase its bid for Starwood Hotels & Resorts in response to a higher competing offer from a group led by China-based Anbang Insurance Group, though it may not be enough to sway Starwood shareholders, financial analysts said Friday.
The merger of the two American groups was accepted based on cash payment of $2 per share plus the remainder in Marriott shares, raising Starwood Hotels group to around $11 billion.
Chinese firms have been buying overseas assets, despite their country’s slowing economy. That suggests that investors expect a bidding war for Starwood. The Anbang Consortium has confirmed that its offer will remain outstanding until the expiration of Marriott’s negotiation period. Marriott climbed 1.9 percent.
The next-largest hotel company is Hilton Worldwide with 4,500 properties and about 735,000 rooms.
Anbang’s offer is all cash, whereas only US$2 of Marriott’s offer is, with the rest in Marriott stock. He predicts Marriott will counter, but that its offer will likely be less than Anbang’s $78-per-share bid.
Chinese investors have been acquiring foreign firms at a record rate.
According to some sources the “Consortium” includes private groups led by Anbang, a Chinese insurance company that is no newcomer in terms of hotel investment.
Primavera was founded by Fred Hu, who previously ran China deal making for Goldman Sachs. This merger deal made by Anbang for Starwood is said to be the biggest purchase of the US Company.
Marriott, which has been notified by Starwood of its plans to end the deal, now has until 28 March to pull a better deal out of the bag. Under the terms of their binding agreement, Marriott would be paid a breakup fee of US$400 million. It is considering postponing a special shareholder meeting scheduled for March 28, according to the statement. Anbang declined to comment.
A combination with Marriott would create the world’s largest hotel company with about 30 brands, giving it more leverage in negotiating commissions with travel agents, a larger frequent-guest program and cost savings.
“Bigger is generally better in the hotel business”, said Lukas Hartwich, senior lodging analyst at Green Street Advisors LLC.
Marriott may be wondering now if it was the right decision to offer mostly stock to Starwood, instead of cash, back in November.
Last April, Starwood hired investment bank Lazard to help it explore strategic alternatives including a possible sale or merger.
The Westin Bonaventure Hotel and Suites is a 35-story hotel in Los Angeles owned by Starwood.
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Starwood’s shares, which have risen 15 percent since the start of the year, were up around 4.7 percent in afternoon trading on the New York Stock Exchange. Marriott International reported revenues of almost $14 billion in fiscal year 2014.
