The bidding war between Marriott International hotels and Chinese insurance giant Anbang for the thousands of hotels under the Stamford-based Starwood Hotels & Resorts Worldwide umbrella continues with a recent bid of more than $15 billion by Anbang.
Anbang leads a consortium of investors including investment firms J.C. Flowers & Co. of New York and Primavera Capital Limited of China, which together issued their second offer for Starwood at $82.75 per share in cash ”” approximately $13.9 billion ”” topping Marriott”™s previous counterbid of $13.6 billion, including $21 in cash per share.
In addition, Starwood stockholders would receive additional consideration in the form of Interval Leisure Group common stock from the spin-off of its vacation ownership business, Vistana Signature Experiences, and subsequent merger with ILG, currently valued at $5.91 per Starwood share, based on ILG”™s share price as of market close on March 24, 2016. With this, the consortium proposal and the ILG transaction have a combined current value of $88.66 per share or approximately $15.03 billion.
In a statement, Starwood said Anbang”™s bid is reasonably likely to lead to a superior proposal as defined in Starwood”™s merger agreement with Marriott, but that its board of directors has not changed its recommendation in support of a merger with Marriott.
Marriott has not yet countered with a higher bid proposal, but the company said in a statement it was confident that its previous offer provided the best course for both companies.
“The combined company will offer stockholders significant equity upside and greater long-term value driven by a larger global footprint, wider choice of brands for consumers, substantial revenue synergies, and improved economics to owners and franchisees leading to accelerated global growth and continued strong returns,” according to Marriott.
Anbang”™s aggressive pursuit of Starwood is the hallmark of a new phase in Chinese business operations, said David Cadden, professor emeritus in the School of Business at Quinnipiac University.
“I think what we are beginning to see is an explosion of mergers and acquisitions over the last 18 months and I think this is one manifestation of it,” he said. “Many Chinese firms are taking a look and really want to move into the global marketplace and they have the cash to make acquisitions overseas. They are truly committed to joining the global market.”
There have been suggestions that Anbang could face regulatory or political hurdles by U.S. officials and legislators uncomfortable with the idea of Chinese companies acquiring American businesses, but Cadden said these obstacles are unlikely.
“Some politicians are almost reflexively against the idea of foreign acquisitions of America business, particularly Chinese acquisitions,” he said. “Some may see it as a backdoor method to acquire intelligence, but I don”™t think that will be a big problem.”
However there may be concerns over the financing behind Anbang and the degree to which the Chinese government may be subsidizing Anbang, he said.
“At my age I don”™t place bets, but overall I think Marriott is in a good position to carry through with the acquisition,” Cadden said.
