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Chinese investors rival Marriott with $14bn offer for Starwood hotel chain Chinese investors rival Marriott with $14bn offer for Starwood hotel chain
(about 7 hours later)
A fight for control of the Starwood hotel chain is under way following a $14bn buyout offer Monday from a consortium led by China’s Anbang Insurance Group. Marriott International faces a battle in its bid for rival hotelier Starwood, owner of the W and Sheraton chains, after a Chinese consortium gatecrashed the merger with a $14bn offer.
Anbang, which remains largely unknown to most Americans, has quickly positioned itself to become a major player in the US hotel industry. The consortium, led by Anbang Insurance Group, has been taking major strides into the hotel industry, finalising a $6.5bn deal to US company Strategic Hotels & Resorts, which manages properties for a number of hotel owners, just days ago. It also bought New York’s Waldorf Astoria for almost $2bn in 2014.
It made a splash in fall 2014 when it bought New York’s Waldorf Astoria for almost $2bn. It cut a $6.5bn deal for Strategic Hotels & Resorts just days ago. Once a provincial car insurer, Anbang has snapped up insurance companies in South Korea, Belgium and the Netherlands, as well as office buildings in Canada and the Belgian banking operations of Dutch insurer Delta Lloyd.
Now it is going toe-to-toe with US hotel giant Marriott International Inc, which said late last year that it would buy Starwood, the owner of Sheraton and St Regis hotels, in a deal worth $12.2bn. The $76 per share cash offer for Starwood, which is also backed by private equity firms JC Flowers & Co and Primavera Capital Group, threatens Marriott’s cash and shares deal agreed upon in November, which is now valued at $10.8bn, or $63.74. The Marriott deal, originally worth just over $12bn, has dropped as the US company’s share price has slipped 6% since it made the offer.
Starwood Hotels & Resorts Worldwide said Monday that it still favors the Marriott deal, but that it’s looking at the latest bid. Shareholders of Marriott and Starwood are expected to vote on that deal, which would create the world’s largest hotel group with more than 5,500 properties, on 28 March. Starwood, based in Stamford, Connecticut, has almost 1,300 properties in about 100 countries and Marriott has more than 4,400 including the Courtyard, Ritz-Carlton and Fairfield Inn.
The offer from the Chinese group includes $76 per Starwood share and Interval Leisure Group stock currently valued at about $5.50 per Starwood share. Starwood said that there are still “a number of matters” that need to be worked out in the group’s proposal. Anbang’s ambitious rival bid comes after a string of overseas acquisitions by Chinese companies. Buyers have already spent $102bn overseas in 2016, according to analysis firm Dealogic, just short of last year’s record of $106bn.
Marriott said Monday that it stands behind its offer. Shareholders of Marriott and Starwood are expected to vote on that deal on 28 March. If Starwood ends its agreement with Marriott or changes or withdraws its recommendation for shareholders to vote in favor of the Marriott transaction, Starwood would have to pay a $400m termination fee. In the UK, Chinese firms have recently snapped up retailers Hamleys and House of Fraser, Savile Row tailor Gieves & Hawkes, luxury yacht firm Sunseeker, breakfast favourite Weetabix and restaurant chain Pizza Express.
Starwood, based in Stamford, Connecticut, has almost 1,300 properties in about 100 countries. Its shares jumped more than 7% in Monday before the opening bell. Meanwhile, US-based Smithfield, the world’s largest pork producer, was bought by a Chinese meat conglomerate for $4.7bn (£3.3bn) in a controversial 2013 deal. Legendary Entertainment, the US studio behind Jurassic World and Pacific Rim, was bought for $3.5bn (£2.4bn) this year by Dalian Wanda, the conglomerate controlled by tycoon Wang Jianlin, and Swedish carmaker Volvo was snapped up by Hangzhou-based Geely in 2010.
Chinese insurance companies are flush with cash and looking to diversify their portfolios before the country’s ageing population starts claiming on their policies.
US and European assets are seen as a good hedge against any future weakness in the yuan.
Starwood said it had been discussing a potential offer with the Anbang consortium since 11 March. It is currently sticking with its recommendation that shareholders support a merger with Marriott, which has allowed Starwood to provide information to Anbang until 17 March.
The Sheraton owner said it would not be commenting further on any potential deal until then.
“Anbang’s non-binding offer places Starwood shareholders in the difficult position of choosing 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 as the winning bidder, Curtis said.
Shares in Starwood, which is listed on the New York stock exchange, rose 8% to $76.08 on Monday after news of the Anbang-led bid was revealed.
Marriott said it would monitor the development and continue to work towards closing its buy-out of Starwood “and the successful integration of the two companies”.