This morning word came out that Chinese consortium Anbang had raised its bid for Starwood to $82.75 in cash.
Marriott had offered 0.8 Marriott shares and $21 in cash last Monday, worth a little over $79 at the time, to outbid Anbang’s previous $78 offer. Marriott’s shares had fallen since then.
Instead of countering with a higher offer — continuing the potentially irrational bidding war — Marriott has issued a statement saying that Starwood’s shareholders to vote to sell for Marriott’s cash and stock offer anyway.
- Suggesting there could be questions about whether Anbang can finance the transaction
- And that there’s some regulatory risk, whereas Marriott – Starwood has already cleared significant regulatory hurdles
Starwood stockholders should give serious consideration to the question of whether the Anbang-led consortium will be able to close the proposed transaction, with a particular focus on the certainty of the consortium’s financing and the timing of any required regulatory approvals.
We know from previous filings that Anbang had made an offer for Starwood last year without guaranteed financing. And we also learned that their $78 offer came with a commitment from a New York branch of a Chinese bank, satisfying Starwood’s board of their ability to finance the deal.
Marriott hasn’t formally ruled out countering but at this point it seems unlikely.
US regulators could have a concern about the proximity of certain hotels to sensitive areas, or the management of certain properties. However in most cases that seems to confuse the ownership of Starwood the chain versus ownership of individual hotels. At worst the US government might insist on divestiture of certain real estate.
There’s little competition concern from the combination, since Anbang isn’t itself a major hotel chain and its presence in the US hotel industry is limited to owning hotel properties largely managed by Starwood competitors (for instance the Waldorf Astoria, and also the expected acquisition of Strategic Hotels and Resorts).
Chinese regulators could take issue with the purchase. There’s been some rumblings about an insurance regulator expressing concern over the percentage of Anbang’s assets which would be held abroad. Although it’s not at all clear Anbang would run afoul of rules, or that it would even matter in the case of this company whose Chairman is married to a granddaughter of Deng Xiaoping.
My own prediction is that Starwood’s board will have to recommend the higher offer if they can validate financing and satisfy themselves regarding regulatory risk. I expect that since we know financing was an issue in the past, we can expect that those issues have been largely resolved or else Starwood’s board wouldn’t have recommended the $78 offer.
Regardless, Starwood shareholders should not take investment advice from Marriott press releases (or travel blogs, but I’m not offering investment advice – hah).
May we live in interesting times, indeed.
(HT: One Mile at a Time)