Starwood Takes Sweetened Offer
(FROM THE WALL STREET JOURNAL 3/22/16)
By Anne Steele
Starwood Hotels & Resorts Worldwide Inc. said it has agreed
to a sweetened $13.6 billion deal from Marriott International Inc.
that trumps last week's boosted bid from a group led by China's
Anbang Insurance Group Co.
In the new deal, Starwood shareholders will receive $21 in cash
and 0.8 of a share of Marriott for each share of Starwood. The deal
values Starwood's share at $79.53, according to Friday's closing
Starwood stock closed at $80.57 on Friday after Anbang swooped
in and raised its offer to a level Starwood called superior. That
offer was for $78 a share in cash, totaling roughly $13.2
Marriott's latest offer significantly increases the share of
cash it will pay for Starwood, since its previous offer had been
0.92 share of Marriott for each Starwood share and $2 in cash.
Shares of Starwood rose 4.5% Monday to $84.19, while shares of
Marriott fell 1.2% to $72.30.
An Anbang representative declined to comment.
Marriott said it expects the deal to be roughly neutral to its
earnings over the next two years. The company expects $100 million
to $130 million in transaction-related charges and transition
"We are pleased that Marriott has recognized the value that
Starwood brings to this merger and enhanced the consideration being
paid to Starwood shareholders," said Starwood Chairman Bruce
Marriott Chief Executive Arne Sorenson said on a call with
investors and analysts that the company believes there are "more
cost synergies" than previously estimated, with savings now
estimated at $250 million, up from $200 million, by 2018, according
to transcript of the call.
"We are also helped by a more efficient deal structure with a
greater percentage of cash," he said. "And finally, we were helped
by a modest recovery in our stock value in recent weeks, as the
disconnect between stock performance and hotel fundamentals
The higher cash offering, however, means Marriott will issue
roughly 20 million, or 14%, fewer shares than the original
Under the new deal, the breakup fee that Starwood would pay if
it chooses another suitor could be elevated in certain situations
to $450 million from its previous $400 million level.
If that fee is triggered, Starwood would also be on the hook to
pay Marriott as much as $18 million for costs related to financing
A person familiar with Anbang's thinking called the raise in the
breakup fee "very marginal" and said it is indicative that Starwood
is leaving the door open for Anbang to raise its offer again.
"The big question this week will be whether Anbang elects to
increase its offer and drive a bidding war," said Canaccord analyst
Ryan Meliker. "While we don't expect that dynamic to unfold, it
also wouldn't surprise us if it happened."
Mr. Meliker said he believes this is the best bid Marriott is
willing to make.
A combination of Starwood and Marriott -- the owner of Courtyard
by Marriott and the extended-stay Residence Inn -- would create the
world's No. 1 hotel chain with more than 1 million rooms and 30
Anbang, meanwhile, has been hungry for hotel assets, having
recently agreed to buy U.S. luxury hotel owner Strategic Hotels
& Resorts Inc. from Blackstone Group LP for about $6.5 billion
About two years ago, Anbang struck a deal to purchase the
historic Waldorf Astoria in Manhattan for nearly $2 billion.
Anbang's partners in the bid for Starwood included Primavera
Capital Group and J.C. Flowers & Co.
The interest in Starwood has come amid the strategic review
process the hotel operator launched last year.
Starwood has reportedly fielded interest from companies around
the globe after opening the door to a sale, spurred by its concerns
that its growth was lagging that of its rivals.
(END) Dow Jones Newswires
March 22, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Historical Stock Chart
From Sep 2021 to Oct 2021
Historical Stock Chart
From Oct 2020 to Oct 2021