A consortium led by China’s Anbang Insurance Group recently made an unsolicited offer to take over Starwood Hotels & Resorts Worldwide for per share in cash, or about .9 billion based on an estimated 170 million shares. Based in Stamford, Connecticut, Starwood, owns nearly 1,300 properties in 100 countries, including the Westin Las Vegas Hotel, Casino and Spa, Westin Lake Las Vegas Resort and Spa, Four Points by Sheraton Las Vegas East Flamingo and Element Las Vegas Summerlin.
Last November Starwood agreed to be purchased by Bethesda, Maryland-based Marriott International in a $12.2 billion deal primarily involving stock. That purchase would create the world’s largest hotel chain, including 5,500 properties and more than 1.1 million rooms worldwide. The next-largest hotel company, Hilton Worldwide, has 4,500 properties and about 735,000 rooms.
C. Patrick Scholes, managing director of gaming and lodging and leisure equity research at SunTrust Robinson Humphrey, said, “I suspect this sort of opened the doors for a bidding war here. I wouldn’t be surprised if Anbang came back with a higher offer, since I’m not sure this initial level would be enough to sway people’s opinions.”
Recently Starwood officials said they still prefer the Marriott proposal but are open to Beijing-based Anbang’s offer and are looking over “a number of matters” regarding the takeover. Marriott and Starwood shareholders will vote on that deal on March 28. If Starwood shareholders decide to go with Anbang, Starwood would have to pay Marriott a $400 million termination fee in cash.
Anbang has been quietly easing into the U.S. hotel market, with a record $1.95 billion purchase of New York’s landmark Waldorf Astoria last year. Anbang also has agreed to buy Strategic Hotels & Resorts Inc. from Blackstone Group LP for $6.5 billion. Strategic owns the Westin St. Francis in San Francisco, JW Marriott Essex House in New York and Hotel Del Coronado in San Diego, plus Four Seasons, Ritz Carltons and other luxury properties.
Marriott’s bid had valued Starwood at $72.08 a share when it was made. Tim Craighead, director of Asian Research/Gaming & Lodging for Bloomberg Intelligence, said Anbang’s offer is a “very surprising development” because the deal with Marriott seemed to be “done.” He added, “Any board has to consider, ‘Do I want $76 in cash now or something on the order of $65 in current value in Marriott stock that has the potential to grow?’ That’s the decision Starwood has to make.”For Anbang, he said, “Having a branded portfolio of hotels would allow the company to participate in the growing base of domestic and international travel that’s a side effect of the emerging Chinese consumer class.”
Other companies participating in the Anbang coalition include private equity firm J.C. Flowers & Company and Chinese investment firm Primavera Capital Group.
In 2015 the U.S. hotel industry had its best year in history, in terms of percent of hotel rooms occupied and the average night room rate.
