It’s Not Over: Chinese Firm Makes “Superior Proposal” For Starwood Once Again

Woohoo! Starwood’s Board of Directors has announced that they’ve received another offer from Chinese insurance group Anbang, which is “reasonably likely to lead to a superior proposal.”

Anbang has made an offer of $82.75 per share for Starwood’s common stock, and the two companies are now discussing non-price related terms.

This offer is $4.75 per share better than Anbang’s previous offer of $78 per share. That offer was outdone by Marriott’s offer, consisting of $21 in cash plus 0.8 shares of Marriott stock. And all of this activity has taken place after we thought the merger between Starwood and Marriott was (more or less) a sure thing.

Marriott-Starwood-Merger

It’ll be interesting to see if Marriott is willing to go any higher with their current offer. As a publicly traded company, I’m not sure how much higher they can go in good conscience…

Per a press release from Starwood:

STAMFORD, Conn.–(BUSINESS WIRE)– Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) (“Starwood”) today announced that its Board of Directors, in consultation with its legal and financial advisors, determined that a revised, non-binding proposal from a consortium consisting of Anbang Insurance Group Co., Ltd., J.C. Flowers & Co. and Primavera Capital Limited (the “Consortium”) is reasonably likely to lead to a “Superior Proposal” as defined in Starwood’s merger agreement with Marriott International, Inc. (NASDAQ: MAR) (“Marriott”).

On March 26, 2016, Starwood received a non-binding proposal from the Consortium, under which the Consortium would acquire all of the outstanding shares of Starwood common stock for $81.00 per share in cash. Starwood’s Board, in consultation with its legal and financial advisors, determined that this proposal is reasonably likely to lead to a “Superior Proposal,” allowing Starwood to engage in discussions with, and provide diligence information to, the Consortium in connection with its proposal. Starwood commenced discussions with the Consortium onMarch 26, 2016 and, in those discussions, the Consortium made a revised proposal with an increased purchase price of $82.75 in cash per share of Starwood common stock. Starwood and the Consortium are continuing to discuss non-price terms related to the Consortium’s revised proposal, and are working to finalize the other terms of a binding proposal from the Consortium, including definitive documentation.

The Starwood Board, in consultation with its legal and financial advisors, will carefully consider the outcome of its discussions with the Consortium in order to determine the course of action that is in the best interest of Starwood and its stockholders. There can be no assurance that discussions will result in a binding proposal from the Consortium, that the Starwood Board will determine that any such proposal is a “Superior Proposal” or that a transaction with the Consortium will be approved or consummated on any particular terms or at all.

Under the terms of the Consortium’s current, revised proposal, the Consortium would acquire all of the outstanding shares of common stock of Starwood for $82.75 per share in cash, an increase of $4.75 per share from the Consortium’s prior binding proposal on March 18, 2016. Pursuant to separate agreements previously entered into by Starwood, Starwood stockholders would receive additional consideration in the form of Interval Leisure Group (NASDAQ: IILG) (“ILG”) common stock from the spin-off of its vacation ownership business, Vistana Signature Experiences, and subsequent merger with ILG, currently valued at $5.91 per Starwood share, based on ILG’s share price as of market close on March 24, 2016 (the “ILG Transaction”). On this basis, the Consortium proposal and the ILG transaction have a combined current value of $88.66 per share.

As previously announced, Starwood intends to convene its stockholder meeting to consider the merger withMarriott on March 28, 2016, and immediately adjourn the meeting until April 8, 2016. Starwood’s Board has not changed its recommendation in support of Starwood’s merger with Marriott.

Crossing my fingers!

 

Comments

  1. Nope. Mariott should walk away. The winner in a bidding war is the loser. Also if this company is getting government backing it probably doesn’t need to turn profits on its investment any time soon. Wow the management is making out like bandits.

  2. At what point does the bidding war become a negative for rewards members for SPG (and Marriott for that matter)? The higher the acquisition cost, the more pressure to achieve ROI, with devaluation of the rewards programs as the lowest hanging fruit.

  3. What’s interesting is that marriotts stock price should shoot up, and it’s current offer may have more value than $82.75.

  4. @ Jon — Certainly agree in theory. That being said, as much as the Chinese insurance group is a big unknown, I think they probably won’t put quite as much pressure (at least in theory) on an American company as a publicly traded one would. Their real goal here is to diversify their assets globally rather than simply looking for the investment which has the highest short term ROI. At least I hope that’s the case…

  5. @ Al — Right, and it seems their stock is up significantly this morning, probably responding to the fact that Anbang has made another offer. It sure seems like Marriott investors are hoping the merger doesn’t happen. If it does go through, I expect the stock price will drop a bit between now and when the deal happens.

  6. It seems nobody in the West knows about Anbang’s background and ambitions. It is a giant firm backed by the most wealthy families from the Party. Its CEO is the grandson-in-law of Deng Xiaoping and its advisors and shareholders include many sons and daughters of military generals. As for this deal, it does not necessarily involve political factors, but it is a good way to serve their needs to transfer their money overseas and get valuable assets, which is a popular trend in China.

  7. I think Marriott should quit, otherwise they could be bought together with Starwood by Anbang. It should be clear that anything Anbang wants, they will get whatever it costs.

  8. @Lucky What does this mean???

    The day I received gold for life was the same day Marriot made their announcement. I have status with Marriot as well, but more often than not stay with SPG because of how good their reward program is. Do you think if the Chinese take over they will change the loyalty program for the worse?

  9. No one wants to see the SPG program get gutted, but it’s far from certain that Anbang would be better than Marriott in that regard. Better the devil you know…

  10. The offer is definitely beyond the estimated appraisal of the spg brand. Although I’m a loyal Marriott lifetime platinum member, I would not encourage a counter offer by Marriott for a brand exceeding thirty to forty percent of its share and equity value.

  11. Marriott should decline. The numbers do not add up. It is clear that the Chinese investors are looking at expanding their cash flow and international equity. There is no benefits of overpaying for this brand. Marriott must have sufficient CAGR and can identify other lucrative M&As such as the exceptional ITC luxury property brand which exceeds the SPG glam in a market with massive growth opportunities.

  12. So sad
    Marriott may have to be content with their 400 dollar a night courtyards OR REDEMPTIONS OF 50K a night for one with no breakfast or late check out for their 75 night a year customers

  13. Remember seeing a comment by the insurance administration saying it’s not in favor of the deal. Not sure how big of an issue it will be though, because Anbang made their new bidding after the comment was made

  14. I’m not sure how many of you have stayed recently at the Waldorf in NYC after the purchase by the same company, but I can tell you that maintenance is severely lacking and service has dropped significantly since the takeover. You may get what you are asking for, a standalone Starwood, but don’t be surprised when corners start getting cut.

    Companies (as well as individuals) are looking to move a significant amount of their “wealth” outside of China, to prepare for the inevitable collapse. You can see this in many other markets – real estate, domain names, etc etc etc.

  15. “Whooo Hoo”? “Keeping my fingers crossed”?

    Your make the logical leap that Chinese Control of SPG will be a) positive and b) retain the benefits you hold so dear

    Be careful what you wish for…..

  16. @dwonderment

    I usually pay 400 a night in the Ritz Carlton.. And I get upgraded roughly 70-80% of the time to suites… With complementary breakfast included. I can’t speak for folks that I don’t know, but my family and friends have the same experience; however I do spend approximately 120 or more nights a year at various Ritz-Carltons exclusively and am also a lifetime plat elite.

  17. @dwonderment @Jeff. I agree with those sentiments. If this was a Hong Kong based company looking to acquire Starwood, I would have no problem with that. If you look at the companies based out of HK; Peninsula, Shangri-La, Langham Place, and Mandarin Oriental, those companies have a proven track record.

    Ambang, I’m not so sure of.

  18. @ Trent
    Ritz Carlton’s (well some of them are really good properties) though a number are very sad and dated
    They are almost obscenely priced especially in New York
    A rock bottom weekend rate is 400 Downtown Battery Park wont @ happen Midtown Ritz with no club access
    As a Platinum Marriott member no suite upgrades there except once for my birthday in Marina Del Rey
    Certainly nice basic guest room always in the properties I stay.
    Marriott has gifted me complimentary Platinum status for a year 3 times over the years and I rarely use it but 5x a year at best
    I’d argue its one of the worst programs value proposition wise I have
    but occasionally it makes sense in some markets
    I just canceled my upcoming Ritz Carlton reservations with the new Hyatt promotion starting newt week
    Marriott is way to stingy to cough up a broad based promotion that’s generous to all
    Cheers

  19. I have already ready that Marriott isn’t willing to make another bid. They are just claiming the Chinese company won’t be able to close, but not giving any real reason why they believe that to be the case.

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