AmEx Risks Losing Its Starwood Card Deal

  • Deal `would all but ensure' AmEx loses partnership, RBC says
  • Marriott CEO tells investors to `stay tuned' for card news

American Express Co. may lose yet another valuable credit-card partner if Marriott International Inc. completes its acquisition of Starwood Hotels & Resorts Worldwide Inc.

The AmEx Starwood Preferred Guest card, which accounts for 4 percent of the company’s loans and 2 percent of total spending, is at risk of extinction now that Marriott has bested Anbang Insurance Group Co. in a bidding war for Starwood, analysts say. Marriott has its own co-brand deal with JPMorgan Chase & Co., the largest U.S. credit-card lender, and Visa Inc., the world’s biggest payments network.

“An acquisition by Marriott would all but ensure the loss given the well-regarded and long-standing Marriott rewards co-brand card in place with JPMorgan Chase," Jason Arnold, an analyst at RBC Capital Markets, said Friday in a note. “We remain negative on AmEx."

American Express Chief Executive Officer Ken Chenault shook up management and reorganized divisions amid the lender’s worst stock slump since the financial crisis, and the loss of key co-brand partnerships including Costco Wholesale Corp., JetBlue Airways Corp. and Fidelity Investments. The Costco partnership, which now belongs to Visa and Citigroup Inc., had accounted for 20 percent of AmEx’s worldwide loans and 8 percent of card spending.

‘Stay Tuned’

Marriott investors will have to “stay tuned" for more information on its credit-card program, CEO Arne Sorenson said Friday. Both AmEx and Chase are “keenly interested in what we do with the programs as are the members of the loyalty programs," Sorenson said on a call with analysts. “I say ‘stay tuned’ because it is not just required, but it’s really fair to involve them in the process and get a lot smarter with their input before we start to make those decisions."

Marina Norville, a spokeswoman for New York-based American Express, said it has a “very strong” relationship with Starwood. “Our cardmembers find a lot of value” in the relationship, she said.

A JPMorgan spokeswoman had no immediate comment.

Marriott moved into position to acquire Stamford, Connecticut-based Starwood after a group led by China’s Anbang withdrew its $14 billion takeover offer this week. Starwood shareholders are scheduled to vote April 8 on Marriott’s cash-and-stock offer, valued at $77.94 a share, or $13.2 billion, based on Thursday’s closing price.

Marriott’s rewards program offers the hotelier better incentives for bookings, while Starwood’s program is more costly to fund, making it likely that Marriott will consolidate the two programs, Mark Devries, an analyst with Barclays Plc, said in a note last week.

Stock Slump

Loss of the Starwood co-brand deal, which AmEx said it renewed in January 2015, would be “meaningful enough to hurt, given the other challenges faced by the company,” RBC’s Arnold said in the note.

AmEx shares slid 0.5 percent to $61.09 at 1:33 p.m. in New York, and have fallen 12 percent this year. The stock tumbled 34 percent -- the worst performance in the Dow Jones Industrial Average -- since Nov. 5, 2014. That’s when Bloomberg first reported that Costco was weighing whether to end its partnership with AmEx in the U.S.  

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