STAMFORD, CT—Starwood Hotels & Resorts Worldwide, Inc. has received an unsolicited indication of interest from a consortium of potential investors, led by China’s Anbang Insurance Group. The proposed offer would acquire all of the outstanding shares of common stock of Starwood for $76.00 per share in cash.
Recently, Anbang, which owns the Waldorf Astoria New York, reportedly cut a $6.5 billion deal with Blackstone Group for Strategic Hotels & Resorts.
Pursuant to separate agreements entered into by Starwood, stockholders would additionally receive consideration in the form of Interval Leisure Group common stock from the previously announced spin-off of its vacation ownership business, Vistana Signature Experiences, and subsequent merger with ILG, currently valued at approximately $5.50 per Starwood share, based on the 20-day VWAP (volume weighted average price) of ILG common stock ending March 11.
For their part, Marriott International, Inc. has reaffirmed its commitment to acquire Starwood, stating that the combined company will offer stockholders significant equity upside and greater long-term value driven by a larger global footprint; wider choice of brands for consumers; and improved economics to owners and franchisees leading to accelerated global growth and continued strong returns. According to the company, the brand remains confident that the previously announced merger agreement is the best course for both companies.
Marriott will monitor this development as it and Starwood continue to work toward the closing of its transaction and the integration of the two companies in anticipation of votes by each company’s stockholders on March 28.
In November 2015, Starwood entered into a definitive merger agreement with Marriott International, Inc. under which Marriott would acquire Starwood in a stock and cash transaction. Starwood has received a waiver from Marriott enabling it to engage in discussions with, and provide diligence information to, the consortium in connection with its proposal. Starwood commenced discussions with the Consortium on March 11. The Marriott waiver expires at 11:59 pm Eastern Time on March 17.
Starwood’s board of directors has not changed its recommendation in support of Starwood’s merger with Marriott. The board, in consultation with its legal and financial advisors, will carefully consider the outcome of its discussions with the consortium in order to determine the course of action that is in the best interest of Starwood and its stockholders. The consortium has not completed diligence and there are a number of matters to be resolved in the consortium’s proposal, according to the company. There can be no assurance that discussions will result in a binding proposal from the consortium or that a transaction with the consortium will be approved or consummated. Starwood does not intend to comment further on its discussions with the consortium prior to the expiration of the waiver period.
Under the terms of the merger agreement with Marriott, at closing, Starwood stockholders would receive 0.92 shares of Marriott International, Inc. Class A common stock and $2 in cash for each share of Starwood common stock. The total consideration to be paid by Marriott, excluding debt assumed, totals $10.8 billion, consisting of $10.5 billion of Marriott common stock, based on the 20-day VWAP of Marriott common stock ending on March 11, and $339 million of cash, based on approximately 170 million fully diluted Starwood shares outstanding at February 19, 2016. Based on Marriott’s 20-day VWAP ending March 11, the merger transaction has a current value of $63.74 per Starwood share, including the $2 cash per share consideration. Starwood stockholders will separately receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with ILG of approximately $5.50 per Starwood share, based on the 20-day VWAP of ILG common stock ending March 11.
Marriott has sufficient cash resources to pay the cash portion of the merger consideration and there is no financing contingency in the merger agreement, according to the company. Marriott expects that the Starwood merger will be completed by mid-year 2016. Under the terms of the merger agreement, should Starwood terminate its agreement with Marriott because it decides to enter into another deal or should Starwood change or withdraw its recommendation to its stockholders to vote in favor of the Marriott merger (and in certain other circumstances), Starwood would be obligated to pay Marriott a $400 million termination fee in cash.
Lazard and Citigroup Global Markets, Inc. are serving as financial advisors and Cravath, Swaine & Moore LLP is serving as legal counsel to Starwood.
In 2014, Anbang Insurance Group, which is based in China, bought Waldorf Astoria from the Hilton Hotel Group for $2 billion.