Starwood gets $13 billion bid from Anbang, tops Marriott offer

19 Mar, 2016 4:45 pm

LONDON – Starwood Hotels & Resorts Worldwide Inc (HOT.N) on Friday said a $13 billion (£9 billion) cash offer from China’s Anbang Insurance Group Co was superior to one from Marriott International Inc (MAR.O), setting the stage for the largest-ever deal by a Chinese company in the United States.

The operator of Sheraton and Westin hotels said the Chinese insurer’s offer beat Marriott’s previously agreed cash and stock offer by nearly 15 percent, and that it planned to scrap the proposed deal with the rival hotel chain.

Anbang has been on a U.S. hotel buying spree as Chinese insurers rush to acquire cash-generating assets as they struggle to keep up with the policy liabilities of the country’s ageing population. U.S. assets are also seen as a good hedge against weakness in the Chinese yuan currency.

The Anbang-led consortium – which also includes private equity firms J.C. Flowers & Co from the United States and Primavera Capital from China – has bid $78 per share in cash, or $13.16 billion overall, based on shares outstanding as of Feb. 19. Anbang’s bid is binding and fully financed, Starwood said.

At Thursday’s close, Marriott’s bid for Starwood was worth $68.06 per share, or around $11.5 billion overall.

Starwood will have to pay a $400 million breakup fee to Marriott if it walks away from their deal. Starwood’s shares were up 5 percent at $80.20 in afternoon trading, their highest level since November.

Marriott, which has until March 28 to counter Anbang’s offer, said it was considering its options.

Dan Wasiolek, a hotel industry analyst at Morningstar, said Marriott could still counter with a higher offer.

“Marriott can increase their offer because they have the balance sheet flexibility,” he said, suggesting the larger rival hotel company could sweeten its offer by $700 million in cash.

If Anbang’s offer is successful, it would boost the company’s reputation as one of China’s top corporate acquirers, adding Starwood to its stable with its nearly 1,300 hotels in about 100 countries. Starwood brings with it several well-regarded hotel brands as well as a loyal business customer base.

The offer follows Anbang’s $6.5 billion deal struck last week for Strategic Hotels & Resorts Inc and its $2 billion purchase of New York’s iconic Waldorf Astoria hotel last year.

John Paulson, president of hedge fund Paulson & Co, Starwood’s largest shareholder, welcomed Anbang’s sweetened offer, saying it “better reflects the value of Starwood.” He called the Chinese company a “proven, sophisticated buyer of related assets.”

Beijing-based Anbang’s bid for Starwood epitomizes its meteoric rise since it was founded in 2014 with an initial focus on car insurance.

Thanks to a spate of dealmaking at home and abroad, privately held Anbang now manages more than 1.9 trillion yuan ($292.3 billion) in assets, according to its website. Its chairman Wu Xiaohui married the granddaughter of former Chinese leader Deng Xiaoping. –Reuters


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