China's Anbang launches hostile $12.84-bn bid for Starwood Hotels

A consortium led by China's Anbang Insurance Group has launched an unsolicited $12.84-billion bid to acquire Starwood Hotels and Resorts, potentially derailing the already planned takeover of the US hotel operator by Marriott International.

The consortium, which also includes private equity firms J.C. Flowers & Co and Primavera Capital Group, has offered to pay $76 per share in cash, a 7.9-per cent premium to Starwood's Friday closing price of $70.42.

Starwood's said in  its disclosure that its board of directors has not changed its recommendation in support of Starwood's merger with Marriott.

"The 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. The Consortium has not completed diligence and there are a number of matters to be resolved in the Consortium's proposal," the statement said.

The Anbang offer does not include the amount shareholders will receive as part of Starwood's earlier announced sale of its vacation ownership business, which is currently valued at about $5.50 per share.

The hostile bid comes just a day after Anbang Insurance agreed to buy Strategic Hotels & Resorts Inc from Blackstone Group for $6.5 billion. (See: Waldorf's Chinese owner Anbang to buy Strategic Hotels for $6.5 bn)

Starwood agreed last October to sell its vacation ownership business, Vistana Signature Experiences to Interval Leisure Group for about $1.5 billion.

in November Marriott had agreed to buy Starwood for $72.08 per share in stock and cash for a total of $12.18 billion. Marriott stock price has since fallen by 6.5 per cent since and the deal is now worth about $11 billion.

Starwood had agreed to pay $400 million as termination fee if it were to terminate the agreed merger. It said said that it has not changed its recommendation to back its merger with Marriott, but it is open to talks with the rival bidder.

Starwood's agreement with Marriott includes a clause where it could consider other offers until 17 March. Shareholders of each company are expected to vote on the deal on 28 March.

''The 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,'' Starwood said in a statement.

''The Consortium has not completed diligence and there are a number of matters to be resolved in the Consortium's proposal. There can be no assurance that discussions will result in a binding proposal from the Consortium or that a transaction with the Consortium will be approved or consummated,'' the statement added.

Starwood has more than 1,200 properties in around 100 countries with brands that include The Luxury Collection, W, Westin, Le Meridien, Sheraton, St. Regis, Aloft, and Element luxury hotels and resorts

The Connecticut-based company has sold properties worth about $1.5-billion over the past two years, including its interest in Park Lane Hotel, London to Sir Richard Suttons Settled Estates.

Last April, Starwood hired investment bank Lazard to help it explore strategic alternatives including a possible sale or merger.

Anbang Insurance is one of the largest insurance groups in China with assets of around $250 billion. It has over 3,000 branches in 31 provinces around China, more than 35 million clients, and employs over 30,000 globally.

The Beijing-based insurer has recently made a push into buying overseas assets and made some high profile acquisitions, especially in Europe and North America.

Apart from the Waldorf Astoria, it has acquired Des Moines, Iowa-based Fidelity & Guaranty Life Insurance Co for $1.6 billion, Dutch life insurer VIVAT for $1.5 billion, Belgian insurer Fidea NV, Belgian banking operations of Delta Lloyd NV, a majority stake in South Korea's Tong Yang Life Insurance Co.

The Marriott-Starwood deal would create the world's largest hotel chain with more than 5,500 hotels and 1.1 million rooms.

The combined brands would include Marriott International, Ritz-Carlton, JW Marriott, Sheraton, Ritz Carlton, the Autograph Collection, Westin, Le Meridien, St. Regis, and Aloft.