Marriott International (MAR) to Buy Starwood Hotels in $12.2B Deal

Shares of Marriott International Inc. (MAR) were trading down -1.24 or -1.70 percent to $71.50 in this morning’s premarket after the company announced early this morning that it had agreed to acquire Starwood Hotels in a deal worth $12.2 billion in cash and stock. The merger will create the largest hotel company in the world. Marriott International stock closed at $72.74, down -1.78 or -2.39 percent in Friday’s regular trading session.

Founded in 1927 as a root beer stand by John and Alice Marriott, Bethesda, Maryland based Marriott International Inc. is a diversified hospitality company which operates a wide range of hotels and lodging facilities.
The company owns over 4,300 properties in 85 countries. Marriott International operates and franchises hotels under 19 brands including Bvlgari, The Ritz-Carlton, JW Marriott, Autograph Collection Hotels, Marriott Hotels and Renaissance Hotels to name only a few. The company had revenues of $14 billion last year.

Starwood Hotels and Resorts is based in Stamford, Connecticut and is one of the world’s largest hotel companies with 1,270 properties in 100 countries. The company employs 180,000 people worldwide and owns and operates hotels, resorts and residences under the Sheraton, Le Meridien, Westin and St. Regis brands, which is only a partial list.

Under the terms of the agreement, Marriott International will pay Starwood $72.08 per share in cash and stock. Starwood shareholders will receive 0.92 shares of Marriott International, Inc. Class A common stock along with $2.00 per share for each share of Starwood common stock. After the deal’s completion, Starwood shareholders will own approximately 37 percent of the combined company’s common stock.

The total consideration of $12.2 billion consists of $11.9 billion in Marriott International stock, based on a 20 day volume weighted average price through November 13th, 2015, and $340 million in cash based on 170 million diluted Starwood shares outstanding on September 30th, 2015. The value of the transaction to Starwood shareholders is $72.08 per share, which includes the $2.00 per share cash consideration.

Arne Sorenson, President and Chief Executive Officer of Marriott International, said in the company’s press release that, “The driving force behind this transaction is growth. This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace. This greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth and enhance long-term value to shareholders. Today is the start of an incredible journey for our two companies. We expect to benefit from the best talent from both companies as we position ourselves for the future. I know we'll do great things together as The World's Favorite Travel Company.”

The combination of the two companies will have 5,500 owned and franchised hotels with approximately 1.1 million rooms worldwide. The two companies combined would have had revenue of $2.7 billion for the twelve months ended on September 30th.

Investors are not too happy with the deal, with both stocks trading lower this morning. Marriott stock off almost three percent, while Starwood Hotels stock is almost seven percent lower.

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Published on Nov 16, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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