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.
On Friday 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.
On Monday Marriott increased their offer substantially to take the lead in the acquisition of Starwood.
All of this has been great for Starwood stock. Shareholders one way or another will get substantially more for their shares than before. With the Starwood board declaring that they would move forward with Marriott’s new offer of 0.8 Marriott shares and $21 in cash for each Starwood share, and a shareholder vote scheduled for April 8, it appears that Marriott is most likely the acquirer.
This is far from a done deal however.
- Anbang already offered $78 in cash.
- Marriott’s shares rose when Anbang looked like it would outbid for Starwood. When Marriott increased its offer, shares fell. (And in part it was that higher value of shares that made the Marriott offer look sufficiently attractive to accept.) Marriott’s shares fell further after the Brussels attack yesterday.
- I wouldn’t overread into one day share price moves, especially after an event like Brussels. But the value of the Marriott deal at yesterday’s close was down to $77.74 a share in cash and stock, less than Anbang’s all-cash offer. And it does underscore the uncertainty in the value of Marriott’s offer — heavily dependent on future price moves up until the transaction actually closes.
- As Marriott’s CEO told employees, Anbang can still make a new offer.
Some analysts expect Anbang to counter Marriott’s recent offer with a significantly higher all-cash bid. In a note to investors, David Loeb, managing director and senior real estate research analyst for Milwaukee-based Baird Equity Research, estimated Anbang would give as much $85 per share for Starwood, about $5 more than what Marriott has presented to Starwood (approximately $79.53 per share).
“I think Anbang is pretty likely to come back and make another offer,” Loeb told Skift. “I think the door is open for that and it seems like the likely outcome at this point.
The likelihood of an increased bid is echoed by Starwood alum and Leading Hotels of the World CEO Ted Teng, an analyst for RBC Capital Markets, and a managing director and equity research analyst for Barclays Capital.
St. Regis Bangkok
It wouldn’t take much more cash to be the clearly superior offer. It’s unclear that the Marriott’s current offer is actually better than the last Anbang offer.
If Anbang does prevail, Marriott will get the increased breakup fee of $450 million plus another $18 million in costs. The breakup in Marriott’s revised offer is actually up to $468 million. Instead of spending more than an extra billion dollars over their previous offer, Marriott would pocket almost half a billion dollars and not have the herculean task of making the acquisition work and deliver results.
There’s still plenty of uncertainty in the outcome.
- Will Anbang up it offer? (Chinese companies have historically been unwilling to engage in such competitive bidding in the US, but may also have a strong mandate to succeed)
- Will regulators approve an Anbang deal? (Probably, but Marriott has already cleared regulatory hurdles)
- Are there Chinese barriers to closing? (China’s insurance regulator could reject the deal for investing too much of the company’s assets abroad, though it’s not clear they would actually be over the proscribed threshold and the company’s Chairman is married to the granddaughter of Deng Xiaoping so may have more political juice than the regulator in any case.)
We’ll have 16 days before the next move needs to be made, though presumably Anbang won’t wait quite that long if they’re going to act.
Regardless the apocryphal ‘Chinese curse’ is certainly true: we’re living in interesting times.