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.
Under the terms of the new offer, Starwood shareholders will receive $21 in cash and 0.80 share of Marriott common stock for each Starwood share, according to a statement on Monday. It values the company at $79.53 a share, based on Marriott’s closing price Friday, compared with a cash bid of $78 a share, or about $13.2 billion, from the Anbang-led group.
Starwood shares jumped above the latest offer price, indicating investors expect a new proposal from the Anbang group. The Chinese-led investors earlier this month made a surprise bid for the owner of brands such as Sheraton, Westin and St. Regis, disrupting a merger deal with Marriott that had been under way since November.
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Starwood “has found itself in the middle of a bidding war,” Tim Craighead, a research director at Bloomberg Intelligence, said in a report. “A Marriott-Starwood combination would create a diversified, asset-light lodging behemoth focused on expanding its base of fees and managed and franchised hotels. A takeover by Anbang Insurance may cloud the long-term growth picture.”
Starwood shares rose 3.8 percent to $83.63 at 10:18 a.m. New York time. Marriott slipped 1.3 percent to $72.23.
A combination with Marriott would create the world’s largest hotel company, with about 30 brands, giving it more leverage in negotiating commissions with travel agents, a larger frequent-guest program and cost savings. Marriott said in the statement it expects to save about $250 million a year with the merger. The cost savings estimate increased by $50 million a year from the initial one made in November.
The termination fee on the Marriott deal was boosted to $450 million from $400 million. Starwood shareholders will own about 34 percent of the combined company’s common stock after the merger is completed, based on current shares outstanding.
“We’re confident” of achieving cost savings of about $250 million a year through the merger, Marriott President and Chief Executive Officer Arne Sorenson said on a conference call Monday. “It should be obvious” that Marriott’s new bid offers “compelling” value to Starwood shareholders, he said.
Calls to an Anbang representative weren’t immediately returned. David Loeb, an analyst with Robert W. Baird & Co., said he expected the Anbang-led investors to increase their offer.
“We have a positive view of the increased cash component and Marriott’s willingness to lever up to get this deal across the finish line,” he said in a report.
Sorenson, when asked on the call about the possibility of another counteroffer, said “We are not going to negotiate in public.”
Sorenson, 57, was speaking from Cuba, where he was traveling with President Barack Obama’s delegation on a historic tour. Marriott said yesterday it received government approval to develop hotel operations in Cuba following the normalization of relations between the two countries. Starwood said over the weekend that it would manage three hotels in Cuba.
News by Bloomberg, edited by Hospitality Ireland