Marriott’s Offer for Starwood Has Been Topped Again!

The deal for Anbang — instead of Marriott — to acquire Starwood – may be back on.

Anbang’s consortium, which includes private equity firms J.C. Flowers & Co and Primavera Capital Ltd, had offered $82.75 per share in cash, in what is reasonably likely to lead to a proposal that is superior to the deal with Marriott, Starwood said on Monday.

..Marriott’s latest cash-and-stock offer, which was announced on March 21, is currently worth around $78 per share. Starwood’s board has not yet changed its recommendation to its shareholders in support of the company’s merger with Marriott, Starwood said.

I wrote on Saturday that the door was open for the consortium led by Chinese insurer Anbang to make another offer.

W Doha

  • The new ‘superior’ offer was already worth less than the earlier Anbang offer with the slide in Marriott’s share price. While it doesn’t make sense to project out the lower value to the date of closing, it underscored how non-obviously better Marriott’s deal was in the first place.

  • Anbang had made a higher offer earlier in the negotiations and might be willing to do so again.

  • Starwood pushed back on Marriott’s request for an even larger breakup fee in the revised deal, suggesting they were trying to leave open the possibility of a new higher offer.

Starwood was being shopped aggressively for over 6 months, and Marriott wound up the high bidder in the eyes of the Starwood board. There was interest from Hyatt. Possible interest from IHG and Wyndham.

Just over a week ago Starwood’s customers and shareholders were excited by a Chinese group led by insurer Anbang making a substantially higher offer for the hotel chain than the pending Marriott Marriott acquisition deal.

Then last Monday Marriott increased their offer substantially to take the lead in the acquisition of Starwood. Marriott’s offer is 0.8 Marriott shares and $21 in cash for each Starwood share. A shareholder vote was scheduled for April 8.

Al Maha Desert Resort

Now Anbang’s new offer is $82.75 per share, not including Starwood’s timeshare business. They’re working to finalize ‘non-price’ details of the agreement. Last time the amount of Marriott’s breakup fee to be paid by the acquirer was an issue, and Anbang ultimately agreed to cover half. No doubt Starwood’s officers are interested in the size of their golden parachutes under the deal (the amount of which grew from the first Marriott offer to the second). Although I’m sure they’re also working through guarantees of financing and breakup fees as well.

Marriott could still counter. I was surprised they upped their last offer by about $1.5 billion, after previously having been the accepted bidder for Starwood. Would Marriott go even further? Though I didn’t think they would match last time, it seems even more likely that they’d call themselves done and pocket $450 million in breakup fees and up to $18 million in expenses rather than arguably overpaying. Marriott has historically been a conservative company, and Marriott’s CEO even previously said he didn’t want to do a Starwood-type deal.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. All things considered, Cash is King in my simplistic way of looking at the world and this deal. It seems as a public company Marriott would take a huge risk in outbidding once again. Their deal is also not exactly straight cash and never was. The fact Starwood seems to like the Marriott deal so much when the “value” is somewhat tied to the stock price makes me wonder “why?” It’s probably all above board and has something to do with the parachutes for the execs because it seems they’re the ones pushing for Marriott in this case. I think it’s time for Marriott to take a bow and get out with the breakup fee and their dignity. If they outbid the consortium again they will be overpaying. The Chinese obviously really want this deal to happen. They’ve been trying at it from the beginning. Never thought I’d say it but Go China! Like everyone else, I want SPG to stay the way it is.

  2. Great news. As an SPG Platinum, and Lifetime Gold about 4 years shy of Lifetime Platinum, I couldn’t be happier!

    Too bad that Anbang have Hilton a 4-generation long commitment to keep the Waldorf-Astoria under the Hilton flag. The Waldorf would have made an excellent addition to SPG’s Luxury Collection (or even the new Design Hotel brand)

  3. The higher the price the more the Starwood brand will be eroded once the sale goes through. I think if the Chinese buy Starwood it will remain in better shape compared to if Marriott wins out.

  4. It’s time for Marriott to see this deal for what it probably was from the beginning, a loser, a walk away. Starwood was already a troubled company, which is why they put themselves up for sale. Paying a lot of money for a company in trouble is risky business unless the buyer has or plans a fix, which Marriott clearly seemed to. If they are smart, Anbang would as well rather than to let Starwood continue on their current troubled path. To pursue Starwood with the level of intensity that they have Anbang must already have figured out their long game to get something out of this deal and it may not be what SPG loyalists who are cheering them on have in mind…

    Be careful what you wish for…!

  5. @DCS they aren’t “a troubled company” they are a company which hasn’t been growing fast enough to satisfy shareholders. They have a market cap bigger than IHG and Choice combined. They have ~ a 13% operating margin. They aren’t ‘troubled’ in any sense.

  6. Reductio ad absurdum:

    So, according to your expert opinion, whoever acquires Starwood should just let them continue on their current path of “not growing fast enough to satisfy shareholders” because all is so peachy?

  7. @DCS I’m saying that are not – as you claimed – a troubled company. I didn’t make any claims about how they should proceed in the future.

    And indeed Starwood has been making changes on its own to accelerate growth since the departure of their previous CEO a year ago. They’ve got a new brand, a Sheraton renewal plan, etc. So status quo isn’t an option in either case.

    But again no you are simply making crap up that I did not say and that is not implied by what I said.

  8. Sounds like it’s time for Marriott to back out with a statement about overpaying and Chinese ownership. Pocket that breakup fee!

  9. @Gary — As usual, you are walking a fine line so that you can claim that words are being put in your cybermouth. Starwood would not have auctioned themselves if everything were hunky-dory. Not performing to the stockholders’ expectations is trouble that has gotten many a CEO booted off. I’d call that “trouble.” Marriott has or had a recipe for righting that ship. Does Anbang, or are they more interested in getting their billions out of China’s declining economy ans unstable currency and into the safe haven that’s the USD? One would think that there are probably cheaper ways to do that!

  10. I hope AnBang buys Shangri-La and combine Shangri-La with StarWood. Then we will see a great Asia-Pac Hotel group.

    Better yet, AnBang buys China Eastern and put them all together, that would be a great travel empire.

  11. @DCS you are conflating totally different concepts. No one said “hunky dory” — shareholders weren’t happy with the rate of growth (though a private company may value it completely differently than those looking at short-term share price moves). That’s why they tossed their CEO. They’ve made moves to grow since then. It’s unclear that Marriott “had a recipe for righting that ship” in fact Starwood’s portfolio would likely shrink under Marriott as they consolidated brands.

    But ‘not growing fast enough to satisfy Wall Street’ is totally different than being ‘a troubled company’.

  12. @Gary you have to realize DCS doesn’t understand things like “business” and “capitalism” given his background…we all pity him

  13. @Gary — Your “analyses” are usually a stretch because that are guided by your biases — what you’d like to see happen or how you think things are or ought to be — rather than by an objective or dispassionate evaluation of data at hand, which is what I do for a living… 😉

  14. BTW, @Gary, you, like many of your readers who are rooting for the Chinese, seem to be judging Marriott as a company based on their loyalty program, that is plainly ridiculous. Marriott is a well-run company that has been profitable for years. Therefore, Starwood would be in much better hands with Marriott than with Anbang, which may just acquire Starwood, “bang” them around a bit and then walk away when profits do not materialize, like spoiled rich brat who asks for Lamborghini only to run it against a tree, abandons it there and asks for a B752!

  15. @DCS Once again you simply either do not read or do not understand.

    I like the idea of more independent competitors in the marketplace rather than fewer.

    Although I’ve also suggested more customers probably benefit from a Marriott combination, even from the perspective of the loyalty program, since there are more Marriott Rewards members than Starwood members and those Marriott members get a whole legion of top end properties at which to use their points.

    Marriott is indeed a well run company. By the way that probably means extracting higher room rates from customers.

    The only real losers from the consumer side in a Marriott deal are those who wind up paying higher rates thanks to how well run Marriott is, and Starwood elites and co-brand credit card holders.

  16. @Gary — Now it is you who have nuanced your position, so it seems to me that you were the one who did not get my drift and now seem to. The overwhelming majority to those in the travel blogosphere rooting for Anbang in this M&A would not have cared a whit if it were not for its implication for the future of the Starwood Preferred Guest loyalty program, and that is really truly something because in the scheme of a $12B deal, SPG is a drop of water in a lake [notice I did not say “ocean”]!

  17. @DCS my position has been eminently clear except of course if you choose to ignore it, cut and dice it out of context, etc. Some people just see what they want to see although this wouldn’t be the first topic on which THAT is true..

  18. @Gary — You mean “cut and paste” the same outdated claims again and again…

    I have many problems, but comprehension or lack thereof ain’t one of them because by trade and by training lexical and syntactic precision and clarity, required for comprehension and understanding, come with the territory…

  19. @Gary — Well, other than your claims of being misunderstood, there is no evidence that’s ever the case because your purported clarifications end up being just restatements of the same things, ergo, I’d understood the first time!

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