We’ve seen a huge amount of consolidation in the airline industry over the past decade, and it looks like that has slowly been spreading to the hotel industry.
Since early 2015 Starwood has been looking for a buyer, which led to a lot of speculation. There were all kinds of rumors as to who could take over Starwood, ranging from Wyndham to IHG to Hyatt to Chinese investors.
Last November a lot of us were caught off guard when we learned that Marriott would be taking over Starwood in a $12.2 billion deal. I can definitely see the synergies between the two brands, though as a Starwood loyalist I’m not at all happy about the takeover. I love Starwood precisely because they’re a smaller group, and therefore have a more rewarding and personalized loyalty program.
People are loyal to Marriott, on the other hand, because they have hotels everywhere. You don’t have to go out of your way to stay at Marriotts, and that’s probably why their loyalty program isn’t as rewarding.
While the merger between Marriott and Starwood is expected to close around the middle of this year, it looks like it might not occur quite as uncontested as we had expected.
A Chinese investor group has submitted an offer to acquire all the outstanding shares of common stock of Starwood for $76 per share. Per a Starwood press release:
Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”) today announced that on March 10, 2016 it received a non-binding proposal from a consortium of companies (the “Consortium”) to acquire all of the outstanding shares of common stock of Starwood for $76.00 per share in cash. Pursuant to separate agreements entered into by Starwood, stockholders would additionally receive consideration in the form of Interval Leisure Group (“ILG”) common stock from the previously announced spin-off of its vacation ownership business, Vistana Signature Experiences, and subsequent merger with ILG, currently valued at approximately $5.50 per Starwood share, based on the 20-day VWAP (volume weighted average price) of ILG common stock ending March 11, 2016.
How much better is this than Marriott’s bid for Starwood? Traveling For Miles has a good rundown:
The Marriott offer to Starwood’s shareholders is a stock and cash offer which would see Starwood’s current owners receive 0.92 Marriott shares and $2.00 in cash for each share held in Starwood.
Based on Marriott’s 20-day volume weighted average price as of 11 March, Starwood shareholders can expect to receive approximately $63.74 per share (including the $2.00/share cash portion of the offer).
Starwood says that a consortium of companies have come forward with an offer of $76 per Starwood share, to be paid wholly in cash, for the outstanding shares of common stock in the hotel chain.
Based on Marriott’s 20-day volume weighted average price as of 11 March, that’s a 19% increase in purchase price.
A 19% increase in purchase price, plus the deal being all cash, must be very tempting. At the same time, the deal between Marriott and Starwood contains a $400 million breakup fee, which has to be factored in as well.
We should know more here pretty quickly. As part of the deal that Marriott and Starwood have, Starwood has a waiver which allows them to entertain other offers, should there be interest. That waiver expires this Thursday, March 17, 2016.
It’s going to be interesting to see what comes of this, especially as a decision has to be made here pretty quickly. I know a lot of Starwood loyalists are dreading the Marriott takeover, so is this what we’ve been hoping for?
On one hand I’d prefer Starwood to be purchased by a company which doesn’t want to merge it into an existing mega-hotel chain.
At the same time, is the evil we know better than the evil we don’t know?
Do you think this has the potential to throw a wrench into the Marriott takeover of Starwood? How would you like to see this play out?
(Tip of the hat to View from the Wing)