For each share of stock, Starwood investors will receive $2.00 in cash and 0.92 shares of Marriott.
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Reuters adds that Starwood’s shares fell as much as eight percent to $68.96 on Monday before closing at $72.27 while Marriott’s shares fell as much as 3.2 percent, before closing 1.3 percent lower.
The announcement comes more than two weeks after Starwood spun off its time share business, Vistana Signature Experiences, and merged it with a subsidiary of Interval Leisure Group.
M. Sorenson said the companies haven’t started the process of antitrust review yet, but he said Marriott has about 10 per cent of the hotel rooms in the USA, while Starwood has about 3 to 4 per cent, so the combined company would be less than 15 per cent of the U.S. hotel supply. It will become the fourth Marriott-owned hotel in the city, joining the Charleston Marriott Town Center, the Residence Inn Charleston and the Courtyard Charleston. CNBC reported on Oct 28 that Hyatt was holding takeover talks with Starwood.
A combined Marriott-Starwood will have thirty hotel brands, many of which overlap considerably, but Sorenson says the brands will stay. In the past few years, Starwood has made a strong push to grow in China, India, the United Arab Emirates as well as more-established European destinations. Starwood will first spin off its timeshare business. By leveraging operating and G&A efficiencies, Marriott expects to deliver at least $200 million in annual cost savings in the second full year after closing.
Starwood, which owns brands including the St. Regis and W hotels, had been fishing for a buyer since April.
Specifically, Marriott was drawn to Starwood’s large global presence and its appeal to younger travelers, Sorenson said. The combination will create the world’s largest hotel company. We thought that would bring more options for customers and create a bigger loyalty program.
In a statement, Marriott executive chairman J.W. Marriott, Jr said, “We have competed with Starwood for decades and we have also admired them”.
Travel points blog One Mile at a Time speculates Starwood will either be be folded into Marriott’s program or the two could continue to exist independently. Furthermore, Marriot plans to keep its headquarters in Bethesda, Maryland.
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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.
