Per the agreement, Starwood shareholders will receive 0.92 shares of Marriott worldwide Class A common stock and $2 in cash for each share of Starwood common stock once the transaction closes.
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Now that Marriot has bought over Starwood for a massive $12.2 billion in stocks and cash, many SPGs (not to be confused with the other SPG Singaporeans are familiar with) are left wondering about the fate of their points.
The deal came after Starwood announced last month that it would separately spin off its time-share business, Vistana Signature Experiences, and merge it with a subsidiary of Interval Leisure Group. Starwood stock has fallen 14% since the announcement in April that the company was looking for a buyer. The combined company’s pro forma fee revenue for the 12 months ended 30 September, 2015 totals over USD2.7 billion.
J.W. Marriott, Jr, chairman of the Maryland-based company, said: “We have competed with Starwood for decades and we have also admired them”.
It would give Starwood shareholders around 37 per cent of the combined company. InterContinental Hotels Group was rumored to be interested in buying the company and Hyatt was also reportedly interested.
This morning before the market opened Marriott CEO Arne Sorenson appeared on CNBC’s Squawk Box to provide the first non-press release answers about the deal. Starwood and Marriott’s honchos have issued statements citing the benefits such as the acceleration of its lifestyle brands (such as W Hotels) as well as a stronger leading loyalty programme. Marriott expects $200 million in annual cost synergies by leveraging general and administrative and operating costs, and once factoring that in, the offer price appears fair.
“We’ve become, I think, more impressed by what we can accomplish by becoming bigger”, he said.
The two companies will have 5,500 hotels around the world with 1.1 million rooms.
It is anticipated that the combined company would deliver significant capital returns to shareholders.
For making this deal possible, Starwood was being advised by Lazard and Citigroup, while Deutsche Bank Securities advised Marriott.
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“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. Assuming receipt of the necessary approvals, the parties expect the transaction to close in mid-2016.
