Starwood Hotels & Resorts Worldwide Inc. has received a $14 billion takeover offer from a group led by China’s Anbang Insurance Group Co., raising the stakes for Marriott International to counter a second time.
The 12-year-old Chinese firm is attempting to aggressively grow its business outside of its home country while Marriott wants to merge with Starwood Hotels & Resorts to attract its very loyal customer base.
Starwood owns the popular brands that include Sheraton, Westin and W. Marriott currently controls 19 brands including its namesake chains, Ritz-Carlton and Bulgari.
Marriott has said it can save $250 million from buying Starwood, up from its initial estimate of $200 million.
Starwood said it’s in negotiations with the Anbang group after receiving a non-binding offer of $82.75 a share in cash. Starwood said it received a non-binding bid of $81 a share on March 26 from the Anbang group, which increased its offer after subsequent discussions.
Marriott says that its second bid which includes stock-and-cash offers stockholders greater long-term value.
The Marriott bid was valued at $78 a share or $13.2 billion.
Shares of Starwood rose 2.4% to $84.12 on Monday while Marriott shared climbed 4% to $71.44.
Anbang is no stranger to hotel acquisition, the company most recently purchased New York’s Waldorf Astoria for $1.95 billion, and is in a deal to acquire luxury-property owner Strategic Hotels & Resorts Inc. for about $6.5 billion.
Starwood’s own real estate holdings are valued at about $4 billion, including the landmark St. Regis in Manhattan.
In the meantime, Marriott is offering 0.8 share and $21 in cash for each Starwood share. That deal is set for a shareholder vote on April 8.
The death blow for Marriott’s takeover attempt?
A higher bid by Marriott could secure a deal but the cost to investors may be too high. “Earnings dilution in 2017 and 2018 could prove a challenging sell to Marriott’s current investors and may lack board approval,” Joseph Greff, an analyst with JPMorgan Chase & Co., said in a report Monday.
If the Anbang group’s new offer becomes binding, Marriott would walk away from the process and collect a $450 million breakup fee.
If successful the Andbang purchase would become the largest takeover of a US company by a Chinese investor. Smithfield Foods was purchased by a Chinese firm for about $7 billion in 2013.