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U.S. hotel operator Starwood Hotels & Resorts Worldwide Inc received a higher buyout offer from a consortium led by China’s Anbang Insurance Group that could derail Marriott International Inc’s planned takeover of Starwood.
Marriott said it remained committed 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 at the begining of trading on Monday. Marriott, which designed a US$12.18 billion offer in November, was up 3 percent.
A cope 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 providers are flush with cash and looking to diversify their portfolios before the country’s aging population starts claiming on their policies. U.S. assets are also a good hedge against any future weakness within the yuan.
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Anbang, the owner of 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 approximately US$6.5 billion, a resource told Reuters.
“Anbang’s non-binding offer places Starwood shareholders in 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 terms of its offer and emerge because the winning bidder, Curtis said.
The US$76 per share offer through the Anbang-led consortium, which also includes private equity investors 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 hello received a waiver from Marriott that enables it to take part 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 amount shareholders will get as part of 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 a lawyer.
? Thomson Reuters 2016
