Anbang checks out of proposed Starwood buy

Surprise move by Chinese firm leaves door open for Marriott to form biggest hotel chain

The W Hotel Hollywood in California, part of the US Starwood chain which Chinese insurance giant Anbang had been courting, until yesterday.
The W Hotel Hollywood in California, part of the US Starwood chain which Chinese insurance giant Anbang had been courting, until yesterday. PHOTO: BLOOMBERG

NEW YORK • China's Anbang Insurance Group yesterday abandoned its US$14 billion (S$19 billion) bid for Starwood Hotels & Resorts, paving the way for the acquisition by Marriott International, in a surprise withdrawal that marks an anti-climactic end to the bidding war.

The war had pitted Marriott's ambitions to create the world's largest lodging company, with about 5,700 hotels, against Anbang's drive to create a vast portfolio of United States real estate assets.

It also represents a blow to corporate China's growing ambitions to acquire US assets. Anbang's acquisition of Starwood would have been the largest takeover of a US company by a Chinese buyer.

"It's a shock," Mr James Corl, managing director at real estate private equity firm Siguler Guff & Co, said of Anbang. "My guess is it boils down to some regulatory risk."

Anbang's latest move came with as much surprise as its unexpected offer three weeks ago, about four months after Marriott signed its merger deal with Starwood.

Anbang's initial US$13.2 billion binding and fully financed offer was accepted by Starwood as superior to Marriott's.

Marriot make a second cash-and- stock offer on March 21, valued at about US$78 a share, or about US$13.2 billion, followed by an Anbang non-binding counter-offer of US$82.75 a share at US$14 billion. It was not immediately clear if Marriott had been planning a second counterbid.

The group's exit means Marriott moves closer to an acquisition that would form the world's largest hotel company, adding brands such as W, Westin and Sheraton to its roster and surpassing Hilton Worldwide once the deal is complete.

A merged Marriott and Starwood would also gain power in negotiating commissions with online travel agents and be better able to compete with upstarts such as Airbnb.

"We were attracted to the opportunity presented by Starwood because of its high-quality, leading global hotel brands," Anbang said in a statement. "However, due to various market considerations, the consortium has determined not to proceed further," it added.

Anbang's withdrawal saves the Starwood board from having to choose a bid that was all cash and higher than Marriott's but was shadowed by concern over potential regulatory scrutiny and questions about funding.

Starwood shares fell 4.1 per cent to US$80.05 as of 6.20pm New York time on Thursday. Marriott slipped 4.9 per cent to US$67.69.

Starwood shareholders are due to vote next Friday on Marriott's cash-and-stock offer, valued at US$77.94 a share, or US$13.2 billion, based on Thursday's close. The value excludes Starwood's pending timeshare spinoff. Marriott shareholders are separately scheduled to vote on the deal on the same day.


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A version of this article appeared in the print edition of The Straits Times on April 02, 2016, with the headline Anbang checks out of proposed Starwood buy. Subscribe