Ever since a group led by the acquisitive — and secretive — Chinese firm Anbang Insurance Group raised its bid for Starwood Hotels and Resorts, advisers to the American hotel company were a little wary that its new suitor might not be able to follow through.
And then early Thursday morning, Starwood and its advisers began to learn that Anbang was likely to walk away, just weeks after first emerging to challenge Marriott International in a highly visible merger contest.
By Thursday afternoon, Anbang and its partners formally withdrew their $ 14 billion takeover offer for Starwood, ceding the operator of the Westin and Sheraton chains to Marriott in a puzzling turn of events.
So ends what had been poised to become one of the big merger battles of 2016, as the century-old Marriott faced losing to a consortium whose leader boasted close ties to the Chinese government.
But after being topped twice in bidding by the group — which included Anbang, the American private equity firm J.C. Flowers & Company and Primavera Capital, an investment firm led by a former chairman of Goldman Sachs for Asia — Marriott decided earlier this week not to immediately raise its latest offer beyond roughly $ 13.25 billion, betting that something would befall the consortium's efforts.
That wager paid off. Combining Starwood with Marriott will create the biggest hotel company in the world, with more than 5,500 owned or franchised hotels and 1.1 million rooms.
Starwood said in a statement on Thursday that it had still managed to extract more money for the company's investors and looked forward to combining with Marriott.
"Throughout this process, we have been focused on maximizing stockholder value now and in the future," Bruce Duncan, Starwood's chairman, said. "Our board is confident this transaction offers superior value for Starwood's stockholders, can close quickly and provides value-creation potential that will enable both sets of stockholders to benefit from future financial performance."
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Shares in Starwood fell more than 4 percent in after-hours trading after Anbang's disclosure, to $ 79.92. Shares in Marriott fell 5 percent, to $ 67.61.
What happened to Anbang's takeover effort is unclear. In a statement on Thursday, the insurer's consortium blamed unspecified "various market considerations" for its need to withdraw.
The abrupt withdrawal of the offer raised new questions, including whether the Chinese government, which has close ties with Anbang, had blocked the proposed transaction, or whether the insurer and its fellow bidders had run into issues with the financing for the deal.
It is a mysterious end to the pursuit by Anbang, a huge insurer that has risen to prominence in recent years, in part through audacious deal-making. The Chinese firm, which has assets of more than $ 291 billion, became a force in the luxury hotel business in less than two years after buying the likes of the Waldorf Astoria and the JW Marriott Essex House.
Its chairman, Wu Xiaohui, had begun to gain a reputation as a Chinese counterpart to Warren E. Buffett, his wealth compounding rapidly since founding the insurer in 2004.
Still, the company he oversees has been criticized for its unusually opaque corporate structure: Thirty-seven interlocking holding companies control over 93 percent of Anbang's shares, while two government-owned companies own the remainder.
Had Anbang won Starwood, its deal would have been the biggest takeover of an American target by a Chinese buyer, according to data from Dealogic.
Yet from the time Anbang publicly bid for the hotel chain, investors and analysts questioned whether the Chinese-led group could actually close on its offer.
Anbang sought to break up Starwood's first deal with Marriott by offering $ 76 a share in cash, going up to $ 78 a share, a proposal that people briefed on the discussions said was fully documented, meaning the financing was in place.
Marriott countered with a new cash-and-stock proposal on March 21 valued then at $ 79.53 a share, raising the prospect that the Chinese-led group would come back with an even higher bid.
Anbang and its partners indeed responded, by offering $ 81 a share and then $ 82.75 a share in cash. But the latest offer, which came last weekend, seemed on shakier grounds with its financing, according to people briefed on the matter.
Analysts said that Marriott would be hard-pressed to beat that price, since doing so could hurt its earnings per share.
But Marriott publicly questioned whether Anbang and its partners truly had the financing needed to close their offer, as well as how long American government regulators would take to bless the deal.
Another particular concern was whether a government panel focused on the national security aspects of mergers would require selling off Starwood properties near sensitive locations. The St. Regis Washington D.C., for example, is only blocks away from the White House, while a W hotel is near the Treasury Department.
Starwood and its advisers pressed the consortium for more information about financing and whether the Chinese government would bless the new proposal, these people said, requesting anonymity to discuss confidential negotiations.
People involved in the transaction spoke on the condition of anonymity.
Publicly, Starwood noted on March 28 that while its board had determined that Anbang's second bid was "reasonably likely to lead to a 'superior proposal,'" the new proposal was nonbinding and that the two sides needed to hammer out "nonprice terms."
The hotelier had been waiting several days for a response from the Chinese-led group when word first began to filter in early Thursday that Anbang and its partners were preparing to walk away, according to the people briefed on the matter.
Then around midafternoon on Thursday, Anbang's consortium sent Starwood's board a letter thanking them for their work but stating that it needed to walk away for unspecified market reasons.
No further reason was given.
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