The Starwood-Marriott Deal is OFF!

Chinese insurer Anbang and its financing partners increased their offer from $76 to $78 a share in cash for Starwood hotels. And that’s on top of the cash Starwood shareholders will receive for the spinoff of Starwood’s vacation ownership business (that was estimated at $7 per share at the time of the Marriott acquisition announcement but is currently estimated at $5.67 per share).

Anbang was presumably one of the three Chinese firms were supposedly seeking government permission to make a bid to buy Starwood Hotels.


W Union Square

The Marriott mostly-stock deal is currently worth just over $65 per share excluding the timeshare spinoff.

In other words, Starwood stockholders get nearly 20% more from Anbang than from Marriott, and get the $5.67 payout from the spinoff under both deals.

Starwood’s board thus considers the deal to be better than the Marriott proposal which was set to go to shareholders in a matter of days. And they believe it is a firm, solid offer in other words that Anbang has the financing to complete the transaction.

Marriott has five days to counter (Update: contra CNBC, Starwood says Marriott has 10 days, HT: Ziggy) but would seem to need to come up with $8+ a share more than their current offer, and likely more in the form of cash, even net of the deal’s $400 million breakup fee and $200 million presumed synergies. There’s plenty to debate at the margins about what constitutes a superior proposal should Marriott counter, but as I wrote on Tuesday as the Cube says, right now Starwood’s life is just about money.

While the Marriott deal has cleared US and European regulatory review, and though there’s no competition concerns with the Chinese acquisition, a large US foreign asset sale could entail some regulatory risk – the US wlll review the transaction for national security risk, though that seems a long shot to pose insurmountable problems.


Dining at the St. Regis Bali

Though consumers don’t weigh in the calculation, there’s little question that a Chinese buyout is best for customers.

  1. It means more competition in the hotel space rather than less competition.

  2. It means Starwood’s management stays more or less intact, driving a strategy that has been what attracted Starwood’s customers to the brand.


W Seoul Walkerhill

While there’s always the possibility of changes, there’s clear upside for customers in Starwood remaining independent (that it stays close to the same) and there’s little downside (since in a Marriott deal it’s likely to change anyway).

The Anbang deal isn’t done yet. Marriott has the opportunity to counter. And the shareholder vote has been put off and not yet rescheduled. But this is a huge development — for Starwood’s investors, employees, and customers. (Investors, of course, are the group that would still benefit even if Marriott successfully countered.)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. So, according to you, the deal is not yet off.

    “The Anbang deal isn’t done yet. Marriott has the opportunity to counter. And the shareholder vote has been put off and not yet rescheduled.” ACTUAL QUOTE FROM YOUR POST.

    So what is with the clickbait headline? What is with the clickbait headlines all the time from your blog?

  2. @jessie – the deal is off, starwood has accepted the anbang offer. but that doesn’t mean there is no risk because marriott has 5 days to counter. they almost certainly will not match.

  3. And it doesn’t make sense for Marriott to try and counter because Anbang has the cash and power to just re-re-counter. Marriott will be walking away, and while sad, will have $400 million in cash to console themselves with.

    A great day for the business traveler, and for the wonderful employees of Starwood who get to keep their jobs.

  4. Bad news for business travelers whose companies fear corporate espionage. Of course if Starwood is only interested in obtaining top dollar than selling customer information is considered valuable.

  5. “Starwood is not permitted to terminate the Marriott agreement to enter into the Consortium’s binding agreement unless the Starwood Board has determined that the Consortium’s offer continues to be a “Superior Proposal” once the negotiation period with Marriott has concluded, and taking into account any revisions to the existing Marriott agreement that are proposed by Marriott during this period. The Consortium has confirmed that its offer will remain outstanding until the expiration of Marriott’s negotiation period.
    ————
    Starwood’s Board has not changed its recommendation in support of Starwood’s merger with Marriott.”

  6. @DCS Starwood’s board HAS determined that they believe Anbang has made a materially better offer. They are not permitted to formally change their recommendation, under the terms of the Marriott agreement, until Marriott’s opportunity to match. However Starwood’s board saying Anbang’s offer is real and for more money is the same thing as saying they recommend taking it.

  7. @Gary — Unlike you, I provided that excerpt without commentary or interpretation. It was intended to put in perspective the clickbait headline that the Marriott-Starwood deal was OFF. Marriott can force Anbang to pay even more with a counter-offer…

  8. @DCS you were offering the quote to counter my claim, so that’s without interpretation. But the quote doesn’t say what you want it to say.

  9. @Gary — The statement says exactly what it says and NOT what you hope it is not saying. Really. A simple syntactic analysis would show that there are no hidden meanings. THE DEAL IS NOT OFF YET because Starwood’s board has yet not voted to call it off.

  10. @DCS Do you take Donald Trump at face value when he says he is going to build a wall along the entire US-Mexican border and make Mexico pay for it?

  11. @Gary — No progressives or liberals, especial liberal academics, are stupid enough to believe anything that Trump says. You’d have to look for the “Believers” among low information Faux News watchers. In other words, Trump is your side’s problem.

    Anyway, if your claim is that the statement is false and you know better from your perch out here what truths are hidden in Starwood board’s statement, then I would have to call that megalomania, Oh Dear Thought Leader in Travel

  12. @DCS my claim is the statement is technically true but misleading. Starwood’s board cannot formally recommend the Anbang offer until Marriott has been given their time to match. But Starwood’s board has said this is a better offer, which means they have to take it unless Marriott matches. And it’s hard to conceive that Marriott would be so foolish.

  13. @Gary — I will translate that as no one has a clue, even Starwood, because we have no idea what Marriott will counter with, if anything. Your wishful thinking is running ahead of reality to even presume a move that Marriott may make “foolish”. Marriott can get this deal if they care enough because they have inside track. The question is: do they care enough?

  14. So? Marriott can come up with more money if they care enough!

    The deal is NOT OFF, and one cannot argue that it is off unless one badly wants it to be off, which you clearly do. You are falling for your own clickbait of a headline, which I am sure what a premature ejaculation upon hearing about Starwood board’s response to the Anbang bid! Get a grip and wait just 10 days and you’ll know for sure; everything else is just conjecture.

  15. How various outlets reported Starwood’s response to the Anbang bid says quite a lot about each outlet’s mindset, does it not?! 😉

    — View from the Wing – The Starwood-Marriott Deal is OFF!
    — Million Mile Secrets – Bidding War! Starwood Has Signed a New Deal, What This Means for Your Points
    — Mommy Points – Big Development for Starwood and Marriott Deal!
    — One Mile at a Time – Here’s What Starwood Is Telling Employees About The Takeover Bid
    — View from the Wing – Marriott Should Walk Away and Let the Chinese Buy Starwood
    — USA Today – The Starwood-Marriott-Angbang triangle: What it means for consumers

  16. @Gary — LOL. The bias is not mine. I just followed one of the ‘pingback’ links above, which took me to “Points with a Crew” from where I copied and pasted the headlines. At least it seems to me that you got the part about the how the headlines seem to reflect a certain “mindset” 😉

    It is, in fact, what I would have expected from USA Today, considering their usual “mindset”, but they seem to have walked that back. For completeness…

    USA Today – Starwood dumps Marriott deal for competing bid.
    Points with a Crew — Starwood accepts the Chinese takeover offer – what we know now.

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