A group led by China’s Anbang Insurance Group Co. withdrew its $14 billion takeover offer for Starwood Hotels & Resorts Worldwide Inc., a surprise move that ends a three-week bidding war and clears the way for an acquisition by Marriott International Inc.

The group decided not to proceed because of “various market considerations,” according to a statement Thursday. Anbang, working with J.C. Flowers & Co. and Primavera Capital Group, had last weekend made a non-binding cash offer of $82.75 a share -- the latest of multiple bids since earlier this month. With the withdrawal, Starwood reaffirmed its commitment to a takeover by Marriott.

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. 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.

“It’s a shock,” 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.”

Starwood shares fell 4.1 percent to $80.05 as of 6:20 p.m. New York time. Marriott slipped 4.9 percent to $67.69.

Shareholder Vote

Starwood shareholders are scheduled to vote April 8 on Marriott’s cash-and-stock offer, valued at $77.94 a share, or $13.2 billion, based on Thursday’s closing price. The value excludes Starwood’s pending timeshare spinoff.

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. Anbang failed to demonstrate that it had financing in place to back up its latest bid, the Financial Times reported Thursday. 

Marriott argued that combining with a seasoned operator would create greater value for Starwood shareholders long term. Marriott’s stock has almost doubled during the four years that Arne Sorenson has been chief executive officer, beating Starwood and the Standard & Poor’s 500 Index by a wide margin.

“Our board is confident this transaction offers superior value for Starwood’s stockholders, can close quickly and provides value-creation potential that will enable both sets of stockholders to benefit from future financial performance,” Starwood Chairman Bruce Duncan said in a statement Thursday.

More Power

A merged Marriott and Starwood would gain power in negotiating commissions with online travel agents and be better able to compete with upstarts such as Airbnb Inc. With the deal’s closing, expected midyear, Marriott would surpass Hilton Worldwide Holdings Inc. to become the biggest hotel company, with about 1.1 million rooms in 5,700 properties. About 35 percent of the rooms are outside the U.S.

The combined company would have about 30 hotel brands. Marriott, besides its namesake label, owns brands including Ritz-Carlton, Bulgari, Protea and Moxy.

Starwood put itself up for sale early last year after lagging behind larger competitors in expanding the number of properties carrying its brands. It was pursued by about a dozen companies, including Hyatt Hotels Corp. and other Chinese suitors, before Marriott swooped in.

The Anbang takeover battle underscored the scale of Chinese companies’ global acquisition ambitions. Had Anbang won Starwood, it would have been the largest buyout of a U.S. company by a Chinese investor, topping the 2013 purchase of Smithfield Foods for about $7 billion.

Anbang has been expanding into U.S. hotels, bursting onto the scene with the $1.95 billion acquisition of New York’s landmark Waldorf Astoria last year. The insurer has agreed to a $6.5 billion purchase of Strategic Hotels & Resorts Inc., an owner of U.S. luxury properties, from Blackstone Group LP. That deal is proceeding as planned, according to people with knowledge of the matter.

Source:
courtesy of BLOOMBERG

by Hui-Yong Yu

If you have any stories or news that you would like to share with the global online community, please feel free to share it with us by contacting us directly at [email protected]