Marriott Weights Its Options for Starwood Deal

Marriott originally struck its deal to acquire Starwood Hotels last November.

BETHESDA, MD—Marriott International said Friday it would weigh its options in view of Starwood Hotels & Resorts Worldwide’s earlier announcement that the Starwood board intended to call off the merger agreement with Marriott and accept a $13.2-billion offer from a consortium led by Anbang Insurance Group Co. The Bethesda, MD-based hotel operator, which struck a stock-and-cash acquisition deal with Starwood last November, said it continues to believe that a combination “is the best course for both companies and offers the best value to Starwood shareholders.” Under the terms of the merger agreement, Marriott has the right to propose revised terms and Starwood must negotiate in good faith with Marriott for a period of five business days ending on Monday, March 28 at 11:59 p.m. ET. Starwood can only cancel the merger agreement if its board continues to view the Anbang offer as a “superior proposal” after negotiating with Marriott. Marriott would receive a $400-million breakup fee if Starwood terminates the merger in order to accept the consortium’s offer. The company said it was considering a postponement of a special meeting of stockholders, currently scheduled for March 28. For its part, Starwood has already decided to cancel its own special meeting, also scheduled for that date. In terms of dollars and cents, the Anbang coalition’s proposal appears to promise a bigger payday for Starwood shareholders. Along with $78 per share from the Anbang group, Starwood’s investors would also see consideration worth $5.67 per share from its previously announced spin-off of its vacation ownership business, Vistana Signature Experiences, to Interval Leisure Group. That totals $83.67 per share, compared to what Starwood says would be a total of $71 per share from the Marriott acquisitions and ILG transaction. The Anbang consortium’s bid, which also includes participation from Chinese investment firm Primavera Capital Ltd. as well as J.C. Flowers & Co., continues the Chinese push into US real estate at a time when hoteliers are moving away from the ownership model. Bloomberg Business on Friday quoted analyst David Loeb with Robert Baird & Co. as valuing Starwood’s real estate at about $4 billion. “The assets are world-class, with some of the highest-quality product in the most sought-after locations and are a key underpinning to Starwood’s value,” Loeb wrote in a note to clients earlier this week, according to Bloomberg.