Starwood Gets Higher $14 Billion Offer From Anbang-Led Groupby
Investors' latest bid tops Marriott's sweetened proposal
Marriott has binding deal set for April 8 shareholder vote
Starwood Hotels & Resorts Worldwide Inc. received a higher $14 billion takeover offer from a group led by China’s Anbang Insurance Group Co., raising the stakes for Marriott International Inc. to counter a second time to salvage a merger that would create the world’s biggest hotel operator.
The takeover battle pits a 12-year-old Chinese firm with aggressive ambitions to expand outside its home country against an 89-year company that’s one of the pioneers in the hotel business. Marriott on Monday reaffirmed its commitment to buying Starwood, which it wants for its loyal pool of guests and brands including Sheraton, Westin and W. Yet analysts including Lukas Hartwich of Green Street Advisors LLC see Marriott as having limited scope to increase its offer without turning a potential win into a Pyrrhic victory.
“Based on the synergies Marriott has outlined, it doesn’t seem likely they could match the Anbang consortium’s price without giving away most/all of the value they expect to create by combining the two companies,” Hartwich said in an e-mail.
Marriott -- whose 19 brands include its namesake chains, Ritz-Carlton and Bulgari -- has said it expects annual cost savings of about $250 million from buying Starwood, up from its initial estimate of $200 million.
Starwood said it’s in negotiations with the Anbang group after receiving a nonbinding offer of $82.75 a share in cash, according to a statement Monday. Marriott, in its own statement, said its second stock-and-cash proposal offers stockholders greater long-term value. That bid is valued at about $78 a share, or about $13.2 billion, based on Marriott’s average trading price as of 11:04 a.m. New York time.
Shares of Starwood rose 2.4 percent to $84.12. Marriott climbed 4 percent to $71.44.
The new offer from Anbang, which is working with J.C. Flowers & Co. and Primavera Capital, shows the insurer won’t easily back down as it seeks to build its hotel holdings. The Beijing-based company last year purchased New York’s Waldorf Astoria for $1.95 billion, and is in a deal to acquire luxury-property owner Strategic Hotels & Resorts Inc. for about $6.5 billion, according to people with knowledge of the matter. Starwood owns real estate valued at about $4 billion, including the landmark St. Regis in Manhattan.
Starwood said it received a non-binding bid of $81 a share on March 26 from the Anbang group, which increased its offer after subsequent discussions. Starwood is negotiating terms of a binding proposal and said it will “carefully consider the outcome of its discussions with the consortium” in order to determine the best course of action for shareholders.
Marriott has worked toward an acquisition since November, when Starwood first agreed to be bought by its larger rival in a cash-and-stock deal. Starwood on March 21 said it would proceed with an amended deal after receiving a sweetened bid from Marriott. A 6.2 percent decline in Marriott’s stock in the four days through Thursday pushed the value of its latest offer below the Anbang group’s previous cash bid of $78 a share.
Marriott is offering 0.8 share and $21 in cash for each Starwood share. That deal is set for a shareholder vote on April 8.
Another higher bid from Marriott would probably result in earnings dilution in 2017 and 2018 “and thus may prove challenging in securing Marriott shareholder, or even its own board, approval,” Joseph Greff, an analyst with JPMorgan Chase & Co., said in a report Monday. If the Anbang group’s new offer becomes binding, the likely end result will be “Marriott walking away from this process and simply collecting its $450 million breakup fee.”
The Anbang group is being advised by PJT Partners Inc. Starwood is being advised by Lazard Ltd. and Citigroup Inc. Marriott is working with Deutsche Bank Securities Inc.
An Anbang-led purchase of Starwood would mark the largest takeover of a U.S. company by a Chinese investor, surpassing the 2013 sale of Smithfield Foods for about $7 billion.