Marriott said it expected to deliver at least $200m in annual savings in the second full year after the deal was completed. Both Starwood and Marriott host industry-leading loyalty networks, and there should be leverage in laying each other’s brands over those platforms. “This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace”, said Arne Sorenson, the chief executive of Marriott, who will lead the combined group.
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Starwood shareholders are expected to receive $79 per share in total value in the deal, which amounts to $70 per share, plus a $2 cash consideration and approximately $7.80 a share based on the sale of Starwood’s time-share businesses that wasn’t included in the Marriott deal.
The companies said that the deal terms announced on Monday represent a 19% premium over Starwood’s average stock price throughout the 20 days ending October 26, the date that acquisition speculations began. Starwood will first spin off its timeshare business. Hyatt climbed 3.6%. Interval Leisure Group fell 4.9%. Fitch expects Marriott will assume Starwood’s outstanding unsecured bonds and/or refinance any of Starwood’s bonds that may be subject to change of control provisions that are triggered by this transaction.
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. He also expects the merger to provide the strongest and the most certain path of growth for the company.
The investigation concerns whether Starwood’s board of directors failed to adequately shop the Company and obtain the best possible value for Starwood’s shareholders before entering into an agreement with Marriott.
“We have been in the business for a long time but Starwood is more global than Marriott is”, Sorenson, said.
“The deal makes sense from a strategic perspective”, Lukas Hartwich, an analyst at real estate research firm Green Street Advisors, said in an email.
The deal will come with $100 million to $150 million in one-time transaction costs.
Lazard and Citigroup served as financial advisors to Starwood, while Cravath, Swaine & Moore acted as legal advisor. Lodging M&A is already having its biggest post-financial crisis comeback, with $35 billion of transactions this year.
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A combined Marriott-Starwood will have thirty hotel brands, many of which overlap considerably, but Sorenson says the brands will stay. Marriott plans to sell Starwood’s remaining owned portfolio, which it believes can generate $1.5 billion-$2 billion in aftertax proceeds.
