Starwood was being shopped aggressively for over 6 months, and Marriott wound up the high bidder in the eyes of the Starwood board. There was likely interest from foreign purchasers. Definite interest from Hyatt. Possible interest from IHG and Wyndham.
Just over a week ago Starwood’s customers and shareholders were excited by a Chinese group led by insurer Anbang making a substantially higher offer for the hotel chain than the pending Marriott Marriott acquisition deal.
Then on Monday Marriott increased their offer substantially to take the lead in the acquisition of Starwood. Marriott’s offer is 0.8 Marriott shares and $21 in cash for each Starwood share. A shareholder vote scheduled for April 8.
Skift carries a piece on SEC filings that reveal the previous offers that Chinese insurer Anbang made for Starwood along the way to the most recent offers of $78 cash and Marriott’s offer which is valued at $75.91 as of Friday’s market close (Marriott’s shares fell on the announcement of their new offer for Starwood, again on the Brussels airport attacks, and have continued to slide.)
Yesterday’s SEC filing spends a lot of time on non-sequitur arguments to justify the Marriott offer over Anbang’s. The only thing that matters is which offer is better for Starwood’s shareholders, so the percentage increase over Marriott’s previous offer doesn’t much matter. Nor does the percentage of Marriott that all of Starwoood’s shareholders, taken together, will own. On the one hand they emphasize the amount of upfront cash (which is less than Anbang offers) and on the other hand they emphasize how important it is that shareholders will get stock. It’s a kitchen sink, ‘cya’ legal approach.
In some sense that’s what these filings are for. And it becomes even more important as the value of Marriott’s offer falls (and is now a couple bucks a share less than Anbang’s offer which was decliend).
But the filing also provides a lot of the play-by-play background on merger discussions, and some insight into Anbang’s willingness to pay.
Al Maha Desert Resort
Starwood put itself up for sale officially on April 29. The next morning when I interviewed their CEO Atlanta, he asked that I introduce him without the ‘interim’ in his title. He said that what Starwood needed at that moment was stability and he was the CEO “until the next one.”
Literally just a week after that Anbang’s CEO expressed interest in acquiring the chain to Starwood’s investment banker. The Chinese insurance conglomerate is hardly a newcomer to the table.
Deanna Ting writes that on August 29, Anbang’s CEO met then-CEO Adam Aron and current CEO Thomas B. Mangas and made a non-binding offer for Starwood for a 20% over its $73.29 closing price. Starwood sought details on Anbang’s financing plans, and the entities entered into a confidentiality agreement on September 2. Anbang was clearly the leading Chinese company reportedly vying to purchase Starwood. Subsequently it was revealed that Hyatt was in the running. And Adam Aron told investors to expect a sale by end of year.
St. Regis Bangkok
Less than a week later Anbang’s CEO and Starwood’s CEO (and future CEO) met, and Anbang made an all-cash offer of “$83 to $86” per share. Anbang however was unable to demonstrate guaranteed financing at the time.
Two weeks later Starwood did its deal with Marriott, Hyatt presumably losing out over the complex ownership structure stemming from the Pritzker family’s outsized voting rights in the company. Though Hyatt was going to restructure to accommodate the transaction, it still would have given long-term shareholders greater leverage in decision-making.
On March 10 Anbang’s law firm Skadden, Arps emailed Starwood’s boarding Chairman and executive leadership with its $76 all-cash offer. They provided assurances on regulatory approval and demonstated financing from a New York branch of a Chinese bank.
Starwood obtained a waiver from Marriott to consider the new higher offer. One sticking point between Starwood and Anbang, as I speculated, was the $400 million breakup fee that would be owed to Marriott. Anbang finally agreed to reimburse half the breakup fee and increased its offer to $78, proposing to operate Starwood “a wholly owned subsidiary of the consortium’s “special purpose vehicle.'”
Marriott wanted a $600 million breakup fee in their new offer. Starwood pushed back, and they ultimately settled on $450 million plus up to $18 million in expense reimbursements, up from $400 million under the previous deal.
Since Anbang was previously willing to pay up to ~ $86 per share for Starwood, they might be willing to pay more, although it’s not clear to me whether that price included the Vistana timeshare business currently valued at around $5.50 but early expected to yield north of $7 per share.
And Starwood, in insisting on a lower breakup fee from Marriott, could have left open the door to a counter offer. Marriott would walk away with $450 million, of which Anbang would presumably reimburse at least half.