Marriott hikes bid for Starwood Hotels & Resorts to $13.6-bn revised

Hotel chain Marriott International today took on China's Anbang Insurance Group-led consortium and clinched the deal to acquire Starwood Hotels & Resorts for $13.6 billion.

It has also sweetened the offer by increasing the cash component of its offer to Starwood shareholders.

Starwood shareholders will now receive $21 a share in cash and 0.80 share of Marriott for each share of Starwood, up from 0.92 shares of Marriott stock and $2 in cash that Marriott had offered to pay in November.

This values Starwood at $13.6 billion up from the earlier $12.2 billion.

Starwood shareholders will also receive additional value from the previously announced spinoff of its timeshare business, which is to be merged with the Interval Leisure Group. That deal is worth about $5.83 per Starwood share, based on Friday's closing prices.

Starwood today said that Marriott's new proposal is superior to the one tabled by the consortium led by the Anbang Insurance.

Marriott said that it now expected to generate $250 million in annual cost savings two years after closing, compared to the $200 million it had estimated in its earlier offer.

The two hotel chains also agreed to raise the termination fee payable to Marriott by Starwood to $450 million from $400 million.

Last week, the Anbang Insurance consortium, which also includes private equity firms J C Flowers & Co and Primavera Capital Group of China, launched an unsolicited $12.84-billion bid to acquire Starwood, potentially derailing the already planned takeover of the US hotel operator by Marriott. (See: China's Anbang launches hostile $12.84-bn bid for Starwood Hotels)

The consortium had offered to pay $76 per share in cash, a 7.9-per cent premium to Starwood's 11 March closing price of $70.42.

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

Starwood, operator of Sheraton and Le Meridien chains of hotels, had late last week said that Anbang's cash offer was superior to Marriott's previously agreed cash and stock offer by nearly 15 per cent, and hence it was planning to terminate the proposed Marriott deal.

Starwood's board has also ''determined that the consortium's proposal no longer constitutes a ''Superior Proposal'', and therefore under the merger agreement Starwood is no longer permitted to engage in discussions or negotiations with, or provide confidential information to, the Consortium.''

Marriott had until 28 March to come back with a higher offer or collect the $400-million breakup fee if Starwood agreed to a deal with Anbang. Starwood would also pay Marriott up to $18 million in costs incurred by Marriott in connection with financing the transaction.

''We are pleased that Marriott has recognized the value that Starwood brings to this merger and enhanced the consideration being paid to Starwood shareholders,'' said Bruce Duncan, chairman of Starwood.

''We continue to be excited about the combination of Starwood and Marriott, which will create the world's largest hotel company with an unparalleled platform for global growth in the upscale segment,'' he added.

The transaction is subject to Marriott and Starwood stockholder approvals, completion of Starwood's planned disposition of its timeshare business, obtaining remaining regulatory approvals and the satisfaction of other customary closing conditions.

Marriott and Starwood have each agreed to convene their respective stockholder meetings to approve the amended merger agreement on 28 March.

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.

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.

With annual revenues of more than $14 billion, Maryland-based Marriott has more than 4,400 properties in 87 countries and territories.

The company operates and franchises hotels under 19 brands, including: The Ritz-Carlton, Bulgari, EDITION, JW Marriott, Autograph Collection Hotels, Renaissance Hotels, Marriott Hotels, Delta Hotels and Resorts, Marriott Executive Apartments, Marriott Vacation Club, Gaylord Hotels, AC Hotels by Marriott, Courtyard, Residence Inn, SpringHill Suites, Fairfield Inn & Suites, TownePlace Suites, Protea Hotels and Moxy Hotels.

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.