Starwood hotels gets binding US$78-a-share offer from Anbang Group

SEATTLE (BLOOMBERG) - Starwood Hotels & Resorts Worldwide Inc., owner of brands such as Westin, Sheraton and W, said it received a binding US$13.2 billion (S$17.9 billion) takeover bid from a group led by China's Anbang Insurance Group Co., a superior offer to one by Marriott International Inc.

Anbang and its partners will pay US$78 a share in cash for Starwood, according to a statement Friday. The offer is US$2 a share more than the surprise bid the group made last week. It eclipses Marriott's cash-and-stock deal, which Starwood agreed to in November and is currently worth about US$68 a share. The announcement puts pressure on Marriott to counter.

Starwood notified Marriott that it and determined the Anbang bid constitutes a "superior proposal" and that Starwood's board intends to terminate the Marriott merger agreement and enter into a definitive agreement with the group. Marriott has until 11:59 p.m. New York time on March 28 to negotiate revisions to the existing agreement.

An acquisition by Anbang, which requires approval by regulators and Starwood shareholders, would mark the largest- ever acquisition of a U.S. company by a Chinese buyer, topping the 2013 purchase of Smithfield Foods Inc. for almost US$7 billion including debt. Investors from China are pouring money into U.S. real estate and seeking the prize of international hotel brands amid slowing growth at home.

U.S. Push Starwood, besides being one of the world's biggest hotel operators, owns real estate worth about US$4 billion, including the landmark St. Regis off Fifth Avenue in Manhattan, according to David Loeb, an analyst at Robert W. Baird & Co.

"The assets are world-class, with some of the highest- quality product in the most sought-after locations and are a key underpinning to Starwood's value," Mr Loeb wrote in a March 14 note to clients.

Anbang started a push into U.S. hotels last year, buying Manhattan's Waldorf Astoria for a record US$1.95 billion. The Beijing-based insurer has also agreed to buy Strategic Hotels & Resorts Inc., an owner of 16 luxury U.S. properties, from Blackstone Group LP for about US$6.5 billion, according to people with knowledge of the matter.

A merger of Starwood and Marriott would have created the world's largest hotel operator. Under the terms of their binding agreement, Marriott would be paid a breakup fee of US$400 million.

Anbang's offer is all cash, whereas only US$2 of Marriott's offer is, with the rest in Marriott stock. Anbang's partners in the Starwood bid include private equity firm J.C. Flowers & Co. and Chinese investment firm Primavera Capital. Primavera was founded by Fred Hu, who previously ran China dealmaking for Goldman Sachs Group Inc.

Chinese investors put a premium on owning real estate. Anbang Chairman Wu Xiaohui told Harvard University students a month before buying the Waldorf how solidly it was built. By contrast, U.S. companies such as Marriott and Starwood have been trying to shed real estate, seeing buildings as a capital burden requiring constant upkeep and favoring the high returns from managing and franchising hotels.

The transaction may trigger a review by the Committee on Foreign Investment in the U.S., a government panel that examines acquisitions of U.S. businesses by foreign buyers to protect national security.