There was substantial interest in Starwood once the hotel chain was clearly on the block for sale. Three Chinese firms were supposedly seeking government permission to make a bid to buy Starwood Hotels. Hyatt was rumored to be the lead bidder.
There had earlier been speculation about a Starwood-IHG (or Wyndham) merger. Wyndham hired away enough Starwood talent that it’s recently been referred to as Wynwood.
SkyCity Marriott, Hong Kong Airport
Now Chinese insurance conglomerate Anbang Insurance Group has submitted a $76 per share all cash offer for Starwood hotels, throwing a potential monkey wrench into the proposed acquisition by Marriott which was expected to close following a shareholder vote March 28.
The offer is worth ~ $12.8 billion, or nearly 8% above the value of Starwood’s shares at Friday’s close.
Marriott’s offer was 0.92 Marriott shares and $2 in cash for each Starwood share held. That’s about $65.38, but excludes the spinoff of Starwood’s timeshare business (which in November was expected to yield $7.80 per share but is now reported to be worth $5.50). The two figures total $70.88, just about Friday’s close for HOT of $70.42.
Marriott issued a release re-affirming its commitment to the deal.
China’s Anbang Insurance Group which reports to have approximately 30,000 employees and over $250 billion in assets. The asset figure is nearly double its reported size when the group announced its purchase of the Waldorf Astoria in New York, and the company has grown through acquisitions. It recently purchased a large Korean insurance firm, was in the running to purchase Hyundai’s securities business, and owns media properties as well.
Anbang just came out with a purchase of Strategic Hotels, which owns properties such as the Ritz-Carltons in Laguna Niguel and Half Moon Bay, the Montage in Laguna, and the Four Seasons in Scottsdale and Jackson Hole. (Strategic Hotels had just been purchased by Blackstone Group in December.)
W Union Square
Normally we might expect ‘the higher offer to win’ but Anbang’s offer may not be quite enough to derail the Marriott sale, since the agreement with Starwood contains a $400 million breakup fee. We may need to see and learn more about the Anbang offer before drawing conclusions. Assuming as Traveling for Miles does that the $76 a share is firm and in addition to the $5.50 per share Starwood shareholders receive from the Vistana spinoff, the gap could certainly be large enough between the offers.
While Anbang appears to be offering a slight premium, and Starwood’s board will have to do its due diligence on the offer, it may not be enough. Though the increase in Starwood’s price in pre-marketing trading suggests at least some market participants think this will ultimately lead to a higher price for the company regardless of who the successful bidder is.
Still, it complicates the shareholder vote at the end of the month and underscores the narrative that Starwood was sold too cheaply. And it makes the apocryphal ‘Chinese curse’ certainly true: we’re living in interesting times.