Anbang Sweetens Offer for Starwood

March 30, 2016

The Westin Costa Navarino, a Starwood property

A high-stakes bidding war to acquire Starwood Hotels Worldwide continued on Saturday as a consortium led by Beijing-based Anbang Insurance Group increased its bid to $14 billion, again topping an offer made by Marriott International.

Starwood said that Anbang’s offer is likely to be a “superior proposal” to Marriott’s bid of $13.6 billion. Marriott issued a statement that reaffirmed its commitment to acquire Starwood.

“[Marriott] is confident that the previously announced, amended merger agreement is the best course for both companies,” the statement said. It went on to say that the deal would offer stockholders significant equity upside and greater-long term value driven by a larger global footprint and a wider choice of brands for consumers.

The statement also warned that Starwood stockholders should seriously consider whether the Anbang-led consortium will be able to close its offer, particularly due to “the uncertainty of the consortium’s financing and the timing of any required regulatory approvals.”

For one thing, an article in Caixin, a China-based financial magazine, said that China’s insurance regulator plans to reject Anbang’s plans to buy Starwood and Strategic Hotels [which it tentatively purchased this month] because it would break a rule stipulating that Chinese insurers cannot invest more than 15 percent of their assets abroad.

On the other hand, some industry insiders have questioned whether it will make financial sense for Marriott to make any higher offers for Starwood.

Starwood accepted a $12.2 billion acquisition offer from Marriott in November, but then opted for a $13.2 billion bid by Anbang on March 17. Marriott then sweetened its offer to $13.6 billion, which Starwood accepted. Anbang was allowed to continue negotiating with Starwood through April 8, however.

If a final deal is reached with Anbang, Starwood would need to pay a $450 million breakup fee to Marriott and as much as $18 million in costs related to financing the proposed deal.

Starwood has nearly 1,300 properties in some 100 countries and 11 brands, including Sheraton and Westin and St Regis.