Chinese insurer Anbang and its financing partners increased their offer from $76 to $78 a share in cash for Starwood hotels. And that’s on top of the cash Starwood shareholders will receive for the spinoff of Starwood’s vacation ownership business (that was estimated at $7 per share at the time of the Marriott acquisition announcement but is currently estimated at $5.67 per share).
Anbang was presumably one of the three Chinese firms were supposedly seeking government permission to make a bid to buy Starwood Hotels.
W Union Square
The Marriott mostly-stock deal is currently worth just over $65 per share excluding the timeshare spinoff.
In other words, Starwood stockholders get nearly 20% more from Anbang than from Marriott, and get the $5.67 payout from the spinoff under both deals.
Starwood’s board thus considers the deal to be better than the Marriott proposal which was set to go to shareholders in a matter of days. And they believe it is a firm, solid offer in other words that Anbang has the financing to complete the transaction.
Marriott has five days to counter (Update: contra CNBC, Starwood says Marriott has 10 days, HT: Ziggy) but would seem to need to come up with $8+ a share more than their current offer, and likely more in the form of cash, even net of the deal’s $400 million breakup fee and $200 million presumed synergies. There’s plenty to debate at the margins about what constitutes a superior proposal should Marriott counter, but as I wrote on Tuesday as the Cube says, right now Starwood’s life is just about money.
While the Marriott deal has cleared US and European regulatory review, and though there’s no competition concerns with the Chinese acquisition, a large US foreign asset sale could entail some regulatory risk – the US wlll review the transaction for national security risk, though that seems a long shot to pose insurmountable problems.
Dining at the St. Regis Bali
Though consumers don’t weigh in the calculation, there’s little question that a Chinese buyout is best for customers.
- It means more competition in the hotel space rather than less competition.
- It means Starwood’s management stays more or less intact, driving a strategy that has been what attracted Starwood’s customers to the brand.
W Seoul Walkerhill
While there’s always the possibility of changes, there’s clear upside for customers in Starwood remaining independent (that it stays close to the same) and there’s little downside (since in a Marriott deal it’s likely to change anyway).
The Anbang deal isn’t done yet. Marriott has the opportunity to counter. And the shareholder vote has been put off and not yet rescheduled. But this is a huge development — for Starwood’s investors, employees, and customers. (Investors, of course, are the group that would still benefit even if Marriott successfully countered.)