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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For each share of stock, Starwood investors will receive $2.00 in cash and 0.92 shares of Marriott.
“The driving force behind this transaction is growth”, Sorenson said in a statement. The opportunity exists to create value through combining the strengths and distribution of Marriott and Starwood that will enhance the competiveness in a marketplace that is quickly evolving.
Since a year, Starwood stock was trading behind its peers, because of which its president and chief executive, Frits van Paasschen, stepped down and was replaced by Adam Aron, a director, on interim basis. Speculation had swirled as recently as last month that Starwood could be purchased by either Intercontinental Hotels or Hyatt Hotels.
Marriott and Starwood haven’t started the process of antitrust review yet, but Sorenson said Marriott has about 10% of the hotel rooms in the USA, while Starwood has about 3% to 4%. However, Marriott expects to save $200 million in annual cost during the second year after closing. Starwood, which is behind the W Hotels and Le Méridien brands, has 11 hotels in Britain. Starwood shareholders would own 37 percent of the combined business.
“Our success has been driven by our ability to anticipate market shifts and meet those changes head on”, Marriott Chief Executive Arne Sorenson, who will lead the combined company, said on a conference call on Monday. “The timeshare transaction should close prior to the Marriott-Starwood merger closing”.
The stock and cash deal, if completed, is expected to add 50% more rooms to Marriott’s portfolio and give it more unique, design-focused hotels that appeal to younger travellers. The fee revenue for the 12 months that ended September 30 totaled more than $2.7 billion across both companies.
The news of the deal came weeks after Starwood sold its time share business to Interval Leisure Group for US$1.3 billion (AU$1.84 billion), reported CNN Money.
Three Chinese firms reportedly had been vying to take over Starwood: hotel giant Shanghai Jin Jiang worldwide Hotels, sovereign wealth fund China Investment Group and HNA Group, parent company of Hainan Airlines. The marquee brand for Marriott in India is Bengaluru’s Ritz Carlton and for Starwood, the flagship is Mumbai’s St Regis.
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Based on Marriott’s 20-day volume weighted average price ending on November 13, 2015, the transaction has a current value of $72.08 per Starwood share.
