 "Starwood plans to accept Anbang's bid")
Starwood Hotels & Resorts Worldwide, owner of brands such as Westin, Sheraton and W, said it plans to accept a $13.2 billion takeover bid by China's Anbang Insurance Group Co. and gave suitor Marriott International Inc a deadline to make a counteroffer.
Anbang and its partners will pay $78 a share in cash for Starwood, according to a statement. The offer is $2 a share more than the surprise bid the group made last week and eclipses Marriott's cash-and-stock deal, which Starwood agreed to in November and is now worth $69.31 a share, based on Marriott's closing price of $73.16. Marriott has a March 28 deadline to renegotiate its agreement and salvage its plan to create the world's biggest hotel operator.
A takeover by Anbang would extend a push into US hotels that started last year with its $1.95 billion purchase of Manhattan's Waldorf Astoria. The sweetened bid underscores the intense interest in hotels from Chinese investors, who are seeking to buy hard assets abroad and capture demand from a surge in Chinese travellers.
Marriott, which avoids overpaying for assets, probably won't engage in a protracted bidding war, according to analysts including Robert W Baird & Co's David Loeb.
"While we expect Marriott to counter the consortium's proposal, we believe Marriott will remain disciplined, and it appears increasingly likely, in our opinion, that Starwood will be acquired by the consortium," Loeb wrote in a research note.
Starwood shares rose 5.5 per cent to $80.57, the highest closing price since July. Marriott climbed 1.9 per cent. Other lodging stocks also rallied, with Hilton Worldwide Holdings, the world's largest operator by room count, gaining 3.6 per cent. The Bloomberg index of hotel real estate investment trusts advanced 1.2 per cent.
John Paulson, the billionaire president of Paulson & Co, Starwood's largest shareholder, said the firm is happy to see the increased offer, which better reflects the company's value.
"Anbang is a proven, sophisticated buyer of related assets and we welcome their interest in Starwood," Paulson said in an e-mailed statement. His firm acquired about a 7 per cent stake in Starwood last year, while the hotel operator was exploring strategic alternatives.
Anbang is joining forces with private equity firm JC Flowers & Co and Chinese investment firm Primavera Capital on the bid.
The Anbang group's fully financed offer is a "superior proposal" to Marriott's and Starwood intends to enter into a definitive pact with the Anbang group, Starwood said. Marriott, in its own statement, said it still believes the combination of the two hotel companies offers the best value to Starwood shareholders and the company is "carefully considering its alternatives."
Starwood postponed its shareholder meeting scheduled for March 28. The company would have to pay Marriott a breakup fee of $400 million if the Anbang group prevails.
Anbang plans to keep Starwood's management and employees and continue its frequent-guest programme, according to a person with knowledge of the matter. A representative for Beijing-based Anbang declined to comment. The insurer is being advised by PJT Partners, the investment bank formed by former Morgan Stanley banker Paul J Taubman in 2013 in conjunction with the spinoff of Blackstone Group LP's merger-advisory business, the person said. A representative for PJT didn't immediately return a call seeking comment.
A combination with Marriott would create the world's largest hotel company with about 30 brands, giving it more leverage in negotiating commissions with travel agents, a larger frequent-guest programme and cost savings. Marriott has said it expects to save about $200 million a year with the merger.
"Bigger is generally better in the hotel business," said Lukas Hartwich, senior lodging analyst at Green Street Advisors LLC. "While the odds seem to favour the Anbang consortium, I'm not sure they have won just yet. There is still an argument to be made that Marriott plus Starwood is a situation where one plus one equals something more than two."
