Marriott has agreed to acquire Starwood Hotels & Resorts in a deal worth $US12.2 billion ($A17.2bn) that will create the world’s largest hotel company with more than a million rooms globally.
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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. InterContinental Hotels Group was rumored to be interested in buying the company and Hyatt was also reportedly interested. “Starwood shareholders will benefit from ownership in one of the world’s most respected companies, with vast growth potential further enhanced by cost synergies”.
After the transaction closes, the company is expected to add three Starwood members to its board, which will expand to 14 members. In addition to the Marriott names, Marriott brands include: Courtyard, Renaissance Hotels, Residence Inn, SpringHill Suites, Fairfield Inn & Suites and TownePlace Suites, and Ritz-Carlton. On CNBC, Sorenson said that combining the two companies will save $200 million annually. “If this is the case I think we can say bye-bye to suite upgrades, as many Marriott properties have very few suites”. Shareholders will own 37 percent of the combined company.
A key question is the future of the two companies’ customer loyalty programs, Geerts said.
Starwood shares were down 3.3% at $72.50 in premarket trading on Monday, while Marriott shares were up 1.7% at $74.01.
Lazard and Citigroup offered financial advice to Starwood, and Deutsche Bank advised Marriott.
The deal comes a few seven months after Starwood said its board was exploring a sale of the business.
The deal terms on Monday represent a 19 per cent premium over Starwood’s average stock price during the 20 days ending October 26, when takeover speculation began, the companies said. Additionally, Marriott has top share in North America (with 10% of existing rooms and 20% of industry pipeline rooms) with attractive select service brands-something Starwood has lacked-while Starwood offers a strong worldwide presence at the higher-end luxury segment, which will complement and enhance Marriott’s brand advantage, the primary source of its narrow moat.
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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.
