Starwood set to accept $18b bid from China group

US resorts operator gives other suitor Marriott deadline to make counter-offer

SEATTLE • Starwood Hotels & Resorts Worldwide, owner of brands such as Westin, Sheraton and W, said it plans to accept a US$13.2 billion (S$18 billion) takeover offer from China's Anbang Insurance Group, and gave suitor Marriott International a deadline to make a counter-bid.

Anbang and its partners will pay US$78 a share in cash for Starwood, according to a statement last Friday. It will be the largest ever acquisition of a US company by a Chinese firm.

The offer is US$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 worth US$69.31 a share, based on Marriott's closing price of US$73.16.

Marriott has a March 28 deadline to renegotiate its agreement and salvage its plan to create the world's biggest hotel operator.

The Anbang group's fully financed offer is a "superior proposal" to Marriott's, Starwood said, adding that it intends to enter into a definitive pact with Anbang.

A takeover by Anbang would extend the company's push into US hotels that started last year with its US$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 travellers. 

Marriott said it is "carefully considering its alternatives". A merger would create the world's largest hotel company with about 30 brands, giving Marriott more leverage in negotiating commissions with travel agents, a larger frequent guest programme as well as cost savings.

Marriott, which avoids overpaying for assets, probably will not engage in a protracted bidding war, said analysts including Robert W. Baird and Co's David Loeb.

"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," Mr Loeb wrote.

Starwood shares rose 5.5 per cent last Friday to US$80.57, its highest closing since July. Marriott climbed 1.9 per cent to US$73.16.

Starwood has postponed its shareholder meeting scheduled for March 28. The company would have to pay Marriott a breakup fee of US$400 million if the Anbang group prevails.

Anbang has said it plans to keep Starwood's management and employees and continue its frequent guest programme, according to a person with knowledge of the matter.

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A version of this article appeared in the print edition of The Sunday Times on March 20, 2016, with the headline 'Starwood set to accept $18b bid from China group'. Print Edition | Subscribe