Starwood Hotels & Resorts Worldwide accepted a revised offer to merge with Marriott International Monday after saying last week that it would go with a competing bid from Chinese insurance company Anbang.
Marriott increased its bid for Starwood from $65.33 a share to $79.53 a share, greater than Anbang's offer of $78 a share. The deal values Starwood at $13.6 billion, excluding its timeshare business. Starwood shareholders will receive $21 cash and 0.8 shares of Marriott Class A common stock for each share of Starwood common stock. The merger will create the largest hotel chain in the world.
Arne Sorenson, Marriott International's CEO, who will helm the newly combined company, told USA TODAY on Monday that he was pleased the deal is back on.
"The deal with Starwood was signed last night,'' Sorenson said. "We’re excited to get back on track and get this historic merger together. We think what we can accomplish together is just fabulous.''
On Friday, Starwood dropped a $12.2 billion bid from Marriott to take over the company and opted instead for a $13 billion all cash offer from a group of investors led by Chinese insurance company Anbang. If Starwood had backed out of the agreement with Marriott, it would have owed its hotel rival $400 million in cash.
Sorenson, who is vice chair of President Barack Obama's Export Council is currently in Cuba with the President, who is making an historic trip to the Communist nation.
He noted that despite Anbang's alternate offer, negotiations between Marriott and Starwood had been productive.
"Even last week in the midst of this Chinese bid that was being negotiated, the Marriott and Starwood teams were working together on integration and planning and trying to look forward to the next step,'' he said. " I think there’s broad recognition of what we can accomplish together. I think there’s a high level of respect the teams have for each other, for their desire to success, and for the expertise that they bring to the work that they do. And we want to get back to that quickly.''
Starwood Hotels and Resorts is poised to play a significant role in Cuba, having received authorization from the U.S Treasury Department to operate existing hotels on the island. Marriott also received the necessary ok from the Treasury Department, but hasn't announced any deals, unlike Starwood. Havana's Hotel Inglaterra will become part of Starwood’s Luxury Collection brand. And the Hotel Quinta Avenida, also in Havana, will become a Four Points by Sheraton. And Starwood has also signed a letter of intent to convert the Hotel Santa Isabel in Havana into a Luxury Collection property.
Sorenson said that with their pending deal, the possibilities to reshape hospitality in Cuba are even greater. "We are eager to roll up our sleeves and get back to work and get ready to close the deal,'' he said.
If Starwood changes its mind yet again, it will now incur a break up fee of $450 million, and Starwood would have to reimburse Marriott up to $18 million of the actual costs Marriott has had so far, according to Baird analyst David Loeb.
Still, there's a strong likelihood that Anbang will be back. "It is an asset that means a lot to Anbang and its partners,'' Loeb says. Also, "Marriott's bid isn’t that much higher . . than Anbang's, and I doubt that Anbang's first bid would be its last.''
Though Anbang is an insurance company, it has made a high profile play in the hotel sector before, buying the Waldorf Astoria New York from HiltonWorldwide in 2014 for $1.95 billion.
But some analysts see a tie up of Marriott and Starwood being a much more natural fit.
"While Anbang offered a better value per share in the short term, Marriott seems a better suitor for Starwood in the long term,'' wrote Euromonitor analyst Wouter Geerts. "Anbang has a track rercord of making sweeping changes in the companies it acquires . . ..Furthermore, a deal with Marriott will strengthen Starwood's position in the global hotel industry, as the combined company will become the largest player, better able to make savings through economies of scale, compete better with (online travel agencies) and resulting in one less global hotel chain to compete with.''
Starwood shares were up 3.86% to $83.68 in morning trading, while Marriott's shares were down 1.37% to $72.16.