Anbang Terminates $14B Offer for Starwood Hotels and Resorts (HOT)

Shares of Starwood Hotels and Resorts (HOT) were trading down -3.45 or -4.14 percent to $79.98 per share in Friday’s pre-market after the Chinese company, Anbang Insurance Group withdrew its $14 billion bid for Starwood late yesterday. The deal’s termination ended a bidding war with Marriott (MAR) which began in November. Starwood Hotels and Resorts stock closed at $83.43, down -0.23 or -0.27 percent in Thursday’s regular trading session.

Stamford, Connecticut based Starwood Hotels and Resorts is one of the world’s largest hotel companies.
Starwood owns 1,207 properties in 100 countries with approximately 346,000 rooms. The company employs approximately 180, 000 people worldwide and owns and operates hotels, resorts and residences under the Sheraton, Le Meridien, Westin and St. Regis brands, among others. Last November, Marriott International announced it would take over the company in a deal worth $12.2 billion.

On March 19th, Starwood announced it was terminating the merger agreement with Marriott in favor of an offer for $13 billion from a consortium led by the Chinese Anbang Insurance Group, which included private equity firms Primavera Capital based in China and U.S. firm J.C. Flowers & Co.

Marriott countered Anbang’s offer on March 21st, when it offered $79.53 per share or about $13.6 billion for Starwood in a cash and stock deal, offering $21 in cash and a reduced stock package of 0.8 shares of Marriott. The original offer was for $2.00 per share and 0.92 shares of Starwood. Anbang then offered $82.75 per share or approximately $14 billion on March 26th.

Starwood was ready to proceed with Anbang’s previous bid had Marriott not countered on the 21st. Yesterday afternoon, Starwood said in a statement that Anbang had withdrawn its offer citing unspecified  “market considerations”. The move assures Starwood shareholders will vote on Marriott’s $79.53 offer at a special shareholders meeting later this month.

In a statement, Anbang and the consortium said that, “We were attracted to the opportunity presented by Starwood because of its high-quality, leading global hotel brands, which met many of our acquisition criteria, including the ability to generate consistent, long-term returns over time. However, due to various market considerations, the consortium has determined not to proceed further. We thank the Starwood board, management team and its advisors for their efforts and support throughout this process.”

Anbang did not give Starwood a reason for the deal’s cancelation in the statement. Nevertheless, an article last month in a Chinese financial publication noted that the Chinese insurance regulator was likely to reject the acquisition since it would put Anbang above the 15 percent threshold China has for investments abroad.

Other possibilities for the deal with Anbang falling through are that Starwood may have asked for a high breakup fee, or a higher bid due to the regulatory risk. Other parties have said that the reason is that Anbang is not interested in pursuing a drawn out bidding war for Starwood.

Last week, Marriott said that it could achieve annual cost synergies of $250 million, up from $200 million which it had originally calculated when it made its first offer for Starwood. The two companies’ shareholders will meet separately to vote on the deal on April 8th.

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Published on Apr 1, 2016
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 2016. Content published with author's permission.

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