Starwood Hotels gets $13.2 billion bid, pressuring Marriott

Bloomberg

Starwood Hotels & Resorts Worldwide Inc., owner of brands such as Westin, Sheraton and W, said it plans to accept a $13.2 billion takeover bid by China’s Anbang Insurance Group Co. and gave suitor Marriott International Inc. a deadline to make a counteroffer.
Anbang and its partners will pay $78 a share in cash for Starwood, according to a statement. The offer is $2 a share more than the surprise bid the group made last week and eclipses Marriott’s cash-and-stock deal, which Starwood agreed to in November and is now worth $69.31 a share, based on Marriott’s closing price of $73.16. Marriott has a March 28 deadline to renegotiate its agreement and salvage its plan to create the world’s biggest hotel operator.
A takeover by Anbang would extend a push into U.S hotels that started last year with its $1.95 billion purchase of Manhattan’s Waldorf Astoria. The sweetened bid underscores the intense interest in hotels from Chinese investors, who are seeking to buy hard assets abroad and capture demand from a surge in Chinese travelers.
Marriott, which avoids overpaying for assets, probably won’t engage in a protracted bidding war, according to analysts including Robert W. Baird & Co.’s David Loeb.

‘Remain Disciplined’
“While we expect Marriott to counter the consortium’s proposal, we believe Marriott will remain disciplined, and it appears increasingly likely, in our opinion, that Starwood will be acquired by the consortium,” Loeb wrote in a research note Friday.
Starwood shares rose 5.5 percent to $80.57, the highest closing price since July. Marriott climbed 1.9 percent. Other lodging stocks also rallied, with Hilton Worldwide Holdings Inc., the world’s largest operator by room count, gaining 3.6 percent. The Bloomberg index of hotel real estate investment trusts advanced 1.2 percent.
John Paulson, the billionaire president of Paulson & Co., Starwood’s largest shareholder, said the firm is happy to see the increased offer, which better reflects the company’s value.
“Anbang is a proven, sophisticated buyer of related assets and we welcome their interest in Starwood,” Paulson said in an e-mailed statement. His firm acquired about a 7 percent stake in Starwood last year, while the hotel operator was exploring strategic alternatives. Anbang is joining forces with private equity firm J.C. Flowers & Co. and Chinese investment firm Primavera Capital on the bid. Primavera was founded by Fred Hu, who previously ran China dealmaking for Goldman Sachs Group Inc.

‘Superior Proposal’
The Anbang group’s fully financed offer is a “superior proposal” to Marriott’s and Starwood intends to enter into a definitive pact with the Anbang group, Starwood said. Marriott, in its own statement, said it still believes the combination of the two hotel companies offers the best value to Starwood shareholders and the company is “carefully considering its alternatives.”
Starwood postponed its shareholder meeting scheduled for March 28. The company would have to pay Marriott a breakup fee of $400 million if the Anbang group prevails.
Anbang plans to keep Starwood’s management and employees and continue its frequent-guest program, according to a person with knowledge of the matter. A representative for Beijing-based Anbang declined to
comment.
The insurer is being advised by PJT Partners Inc., the investment bank formed by former Morgan Stanley banker Paul J. Taubman in 2013 in conjunction with the spinoff of Blackstone Group LP’s merger-advisory business, the person said. A representative for PJT didn’t immediately return a call seeking comment.