Shares of Starwood Hotels & Resorts Worldwide were up more than 7 percent on Monday after a group of Chinese firms made a $12.8 billion takeover offer. The offer could trump the existing $12.2 billion buyout offer from Marriott that was made in November. RBC Capital opines: MAR could look to modestly increase its bid, but we view the current deal as fairly valued with expectations of being accretive in the second full year of ownership. We believe Anbang’s deal reflects a lower return requirement and a desire to diversify its assets. Anbang, which acquired the Waldorf Astoria in New York from Hilton in 1Q15, is one of China’s largest insurance companies with assets of ~1.65 trillion RMB ($250+ billion USD).
Analysts react on Starwood Hotels deal
On Thursday March 10, HOT received an unsolicited non-binding offer to acquire all outstanding shares of the company for $76.00 in cash from a consortium of investors led by Anbang Insurance. Coupled with the current $5.50 valuation for the timeshare business under contract to be acquired by IILG in a separate transaction, the combined takeover value of the company is $81.50 per share. This offer comes months after a long sales process, that included discussions multiple parties, was concluded. Starwood has received a waiver from MAR enabling the company to engage in discussions with the consortium, through March 17. We would expect a binding offer to materialize by then.
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HOT announced it has received a non-binding proposal from a consortium of companies led by Chinese based Anbang Insurance Group (who bought the Waldorf Astoria from Hilton in 2014 for c$2bn) to acquire it for $76 in cash plus shares in Interval Leisure Group worth c$5.50. This total of c$81.50 compares with the MAR offer currently worth $69.24 (largely in MAR shares). There is no guarantee the new offer results in a binding offer for HOT.
As a combined company, Marriott and Starwood should be able to generate significant revenue synergies from the combined lodging platform. The offer from the consortium led by Anbang offer no such future synergies. Even if Anbang firms up its offer, Anbang may need to come up with a higher price. In our view, Marriott remains the best long-term partner for Starwood shareholders.
It is noteworthy that Anbang is reported to have only recently agreed to buy Strategic Hotels & Resorts from Blackstone for $6.5 BN (Blackstone itself had only purchased formerly listed BEE for ~$6 BN in December 2015). The latest Anbang move reaffirms a recent trend of China companies becoming more aggressive with respect to outside M&A.- most recent examples include Chinachem’s $43 BN for Syngenta and Zoomlion’s unsolicited $3.3 BN unsolicited bid for TEX.
See the following visualizations which highlight relevant figures regarding Starwood Hotels and Marriott.
Starwood Hotels & Resorts Worldwide Inc. (HOT) Stock Price – Current Day
Starwood Hotels & Resorts Worldwide Inc. (HOT) vs. S&P 500 Percent Change Over Time – 1 Year
Starwood Hotels vs. Marriott 2-Year Returns
Marriott International Inc. (MAR) Stock Price – Current Day