Starwood Hotels & Resorts Worldwide accepted an improved takeover offer from Marriott International valued at $13.6 billion, proceeding with plans to form the world’s largest hotel operator as investors led by China’s Anbang Insurance Group seek to thwart the deal.
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Anbang’s improve bid on Friday was worth approximately US$13.2bn in cash, valuing Starwood at US$78 per share. Last week, a proposed deal between the two hotel chains was called off when Chinese behemoth Anbang Insurance Group jumped in with its own offer.
Thomas B. Mangas, Starwood’s Chief Executive Officer, said: “Starwood’s history of creativity, innovation, sustainability and being a first mover is core to who we are and what has made us a formidable competitor in the industry with a long, global lead”.
A combination of Starwood and Marriott-the owner of Courtyard by Marriott and the extended-stay Residence Inn-would create the world’s No. 1 hotel chain with more than 1 million rooms and 30 brands. A spokesman for Marriott said the company is awaiting news for a shareholder vote. The companies continue to expect to close the merger in mid-2016.
Marriott and Starwood still anticipate the deal closing around midyear, assuming it receives the necessary approvals. Starwood shares climbed 4.5 percent Monday as investors weighed the possibility of a competing proposal. Days before it contested Marriott for control of Starwood, it laid down US$6.5 billion to acquire Strategic Hotels & Resorts Inc, which owns several high-end properties, including the JW Marriott Essex House in NY and Hotel Del Coronado in San Diego, California.
Starwood declined to comment.
“The power of the information and guest relationships to me is the greatest value that would come out of this for Marriott”, said Bjorn Hanson, a professor of hospitality and tourism at New York University.
Marriott said Monday that it is confident that it can achieve $250 million in annual cost savings within two years of closing on the Starwood transaction.
But as part of the original agreement, Marriott had five business days to present revised terms and Starwood was required to negotiate in good faith.
“We are pleased that Marriott has recognised the value that Starwood brings to this merger and enhanced the consideration being paid to Starwood shareholders”, said Starwood Chairman Bruce Duncan.
Under the new deal, the breakup fee that Starwood would pay if it chooses another suitor could be elevated in certain situations to $450 million from its previous $400 million level.
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Anbang made a big splash in the United States in 2014 with its $1.95 billion acquisition of the Waldorf Astoria New York luxury hotel.
