U.S. hotel operator Starwood Hotels & Resorts Worldwide Inc received a higher buyout offer from the consortium led by China’s Anbang Insurance Group that could derail Marriott International Inc’s planned takeover of Starwood.
Marriott said it remained dedicated to the offer, which would create the world’s largest hotel chain with top brands including Sheraton, Ritz Carlton and the Autograph Collection.
Starwood’s shares rose 7.5 percent in early trading on Monday. Marriott, which made a US$12.18 billion offer in November, was up 3 percent.
A deal with the Anbang-led group, whose offer values Starwood at US$12.84 billion, may not be easy given increased U.S. scrutiny of Chinese-initiated M&As over security concerns.
Chinese insurance companies are flush with cash and looking to diversify their portfolios prior to the country’s aging population starts claiming on their policies. U.S. assets are also a great hedge against any future weakness within the yuan.
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Anbang, who owns New York’s Waldorf Astoria, is making a big push into the U.S. hotel industry. It’s also agreed to buy Strategic Hotels & Resorts Inc from Blackstone Group LP for around US$6.5 billion, a source told Reuters.
“Anbang’s non-binding offer places Starwood shareholders within the difficult position of selecting between Marriott’s bird-in-a-hand firm commitment and Anbang’s two-in-the-bush offer,” Nomura Securities analyst Harry Curtis wrote in a note to clients.
Marriott may slightly improve the relation to its offer and emerge because the winning bidder, Curtis said.
The US$76 per share offer by the Anbang-led consortium, which also includes private equity firms J.C. Flowers & Co and Primavera Capital Group, tops Marriott’s offer of US$72.08 per share.
Marriott’s offer is now worth about US$11 billion as Marriott shares have dropped 6.5 per cent because it made the sale.
Starwood said it received a waiver from Marriott that enables it to engage in discussions with the consortium. The waiver will expire at 11:59 p.m. ET (0359 GMT) on March 17.
Anbang’s offer excludes the total amount shareholders will get included in the previously announced sale of Starwood’s vacation ownership business, currently worth about US$5.50 per Starwood share.
Interval Leisure Group said in October it would buy Starwood’s vacation ownership business, Vistana Signature Experiences, then valued at about US$1.5 billion.
Marriott’s offer of US$72.08 per share also excluded the vacation ownership business.
Lazard and Citigroup Global Markets Inc are financial advisers to Starwood. Cravath, Swaine & Moore LLP is legal counsel.
? Thomson Reuters 2016
