Marriott, a Value Investor, Seen Losing Starwood to Anbang Group

  • Company expected to counter Anbang's $78-a-share cash bid
  • Marriott's current bid is valued at about $69.50, mostly stock

Marriott International Inc. will probably lose Starwood Hotels & Resorts Worldwide Inc. to a group led by China’s Anbang Insurance Group Co. because it avoids overpaying for assets, according to analysts including Robert W. Baird & Co.’s David Loeb.

“While we expect Marriott to counter the consortium’s proposal, we believe Marriott will remain disciplined, and it appears increasingly likely, in our opinion, that Starwood will be acquired by the consortium,” Loeb wrote in a research note Friday.

Starwood received a fully financed bid of $78 a share in cash from the Anbang group, topping Marriott’s offer in stock and cash, currently valued at about $69.50 a share, the Stamford, Connecticut-based hotel operator said Friday. Starwood said it plans to recommend the Anbang offer to shareholders and gave Marriott until March 28 to revise its bid, which Starwood accepted last November.

“We do not expect Marriott to engage in a protracted bidding war,” Loeb said.

Considering Options

Marriott is “carefully considering its options,” and “continues to believe that a combination of Marriott and Starwood is the best course for both companies,” the Bethesda, Maryland-based firm said Friday in a statement. It is considering postponing a special shareholder meeting scheduled for March 28, according to the statement.

Starwood’s board is faced with the choice of taking a higher cash offer from a relatively new entrant in the lodging industry or selling to an 89-year-old rival. A deal with Marriott would create the world’s biggest hotel company with more leverage negotiating commissions with travel agents, a larger frequent-guest program and cost savings. Marriott has said it expects cost savings of about $200 million a year from the Starwood merger.

“Bigger is generally better in the hotel business,” said Lukas Hartwich, senior lodging analyst at Green Street Advisors. “While the odds seem to favor the Anbang consortium, I’m not sure they have won just yet. There is still an argument to be made that Marriott plus Starwood is a situation where one plus one equals something more than two.”

Still, Hartwich says it’s unlikely that Marriott would pay a big premium for Starwood. “Marriott has a history of being a wise capital allocator,” he said. “There is a decent chance Marriott ups its bid a little bit, but I don’t see them matching the Anbang consortium.”

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