Yesterday’s widely-reported deal, which saw Marriott acquire Starwood for $12.2bn, created the world’s biggest hotel company and has led to speculation that other companies will follow suit to better compete with the new behemoth which now oversees 5,500 hotels under 28 hotel brands.
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The combination would create the No. 1 hotel company globally – with more than a million rooms – and bring together 30 brands across all lodging segments, from Starwood’s higher-end W Hotels, St. Regis and Westin brands to Marriott’s limited-service offerings like Courtyard by Marriott and its extended-stay chain Residence Inn.
Starwood shareholders will receive 0.92 shares of Marriott global, Class A common stock and $2.00 in cash for each share of Starwood common stock, a joint statement from the companies read.
Arne Sorenson, the CEO of Marriott said that he was attracted to Starwood due to their loyalty program in part.
This past July, Intercontinental Hotels Group had been reportedly in talks to buy Starwood, but the rumors were rejected quickly by Intercontinental.
But the NY Times’ Leslie Picker points out that the share price of both of Marriott and Starwood have declined at least 9% since the latter announced it was for sale, reversing Sorenson’s stated sentiment that a deal would be “inconsistent with its previous acquisition strategy”. Indeed, TheStreet’s Jim Cramer said that “this is a bad deal for Starwood shareholders” on CNBC’s Squawk on the Street.
The merger will give Marriott, based in Bethesda, Md., 30 brands and more leverage with corporate travel departments, which often look for one giant chain to house all of their employees.
Hilton Worldwide, based in McLean, would be the next-largest hotel company with 4,500 properties, 731,000 rooms and $10.5 billion in annual revenue. This deal will also be watched closely by frequent business travelers. Separately, they will also get $7.80 per Starwood share upon completion of a spin-off of the company’s timeshare business to Interval Leisure Group. Starwood partners with Delta Air Lines, American Express and Uber while Marriott partners with United Airlines and Chase. As recently as October, Hyatt was preparing a cash-and-stock bid for Starwood, people with knowledge of the negotiations said at the time.
Mr. Sorenson will remain CEO of the combined company and Marriott will increase its board to 14 members by adding three directors from Starwood.
Marriott said Monday it is still figuring out how it would merge the two rewards programs. The company has found success in expanding its overseas operations; about half of Starwood’s rooms are outside the U.S.
Marriott said it expects the deal to close in the middle of next year, with the transaction contributing to earnings in the second year after the merger concludes.
“Sheraton, Starwood’s flagship brand has been performing poorly in recent years, but whether Marriott will put Sheraton up for sale, or rather use its expertise and capital to make it profitable again, is to be seen”, he said.
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Abha Bhattarai contributed to this article.
