Starwood Hotels & Resorts said it planned to end a deal to be acquired by Marriott International Inc after receiving a superior proposal from a group led by China’s Anbang Insurance Group. The Anbang-led group has raised its offer for Starwood. USA TODAY
Starwood Hotels and Resorts said Friday that it is dumping a previous deal to sell itself to Marriott International after a different group of investors made a better offer — but that it will give Marriott a chance to improve its bid before finalizing the sale.
Starwood disclosed that China-based Anbang Insurance, U.S. private equity firm J.C. Flowers & Co. and China-based investors Primavera Capital Limited had offered $ 78 per share, or about $ 13.2 billion — more than Marriott’s offer of $ 65.33, or about $ 11 billion.
Marriott had trumpeted its bid to become the largest hotel company in the world by acquiring the owner of brands such as W Hotels, St. Regis, Westin and Aloft. But the competing offer for Starwood presents a serious threat to that ambition.
Starwood said it had deemed the new offer a “superior proposal” and that Marriott can make a new offer through March 28.
The new offer — up from the Anbang group’s previous pitch of $ 76 per share — sets up what could become a bidding war between the foreign investors and an American hotel giant defined by brands such as its namesake hotel chain, Courtyard, Residence Inn and Ritz-Carlton.
“Starwood will negotiate in good faith with Marriott during this period, and the Starwood board will consider in good faith any changes to the Marriott agreement that Marriott may propose,” Starwood said in a statement.
Marriott signaled that it would likely make a new offer, saying it “continues to believe that a combination of Marriott and Starwood is the best course for both companies” and that it is “carefully considering its alternatives.”
If Starwood accepts the Anbang investor group offer, it will be required to pay a $ 400 million termination fee to Marriott.
To be sure, Starwood’s considerations include more than just the pure financials of the deal.
On one hand, the Marriott entree may be attractive to Starwood shareholders who believe the hotel operator is best suited to maximize the value of the deal by running properties efficiently.
On the other hand, Starwood may be concerned about the prospect of regulatory opposition to the Marriott deal.
U.S. trade officials have recently sought to block several deals, such as the Staples acquisition of Office Depot and the Tribune Publishing acquisition of the Orange County Register.
“I expect the government would be concerned about the size of the company if Starwood and Marriott merged,” University of Richmond law professor Carl Tobias said in an email.
Federal Trade Commission spokeswoman Betsy Lordan said she could not say whether the FTC was involved. The agency typically does not comment on any potential actions until a later stage, such as when a complaint is filed.
Anbang’s ascension to the lead role in the Starwood deal comes more than a year after the Chinese insurance company acquired the famed Waldorf Astoria hotel in New York for nearly $ 2 billion.
The prospective deal would be the third largest acquisition by a Chinese company or investors of a U.S. business, according to research firm Dealogic, ranking only behind the sales of Syngenta and Nexen.
It also comes amid a rising tide of Chinese acquisitions of U.S. companies, already totaling $ 102.5 billion in 2016, according to Dealogic. That’s on pace to shatter the 2015 record of $ 107.5 billion, which was 50% higher than the previous mark set in 2014.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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