Starwood Hotels sold to Marriott in $13.6bn deal

May 2016 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Marriott International, Inc and Starwood Hotels & Resorts Worldwide, Inc. have announced a $13.6bn merger that will create the world’s largest hotel company.

The deal, an amended agreement by Marriott to take over Starwood, heads off a bid from a group led by China’s Anbang Insurance Group Co and will see Starwood shareholders receive $21.00 in cash and $0.80 shares of Marriott International, Inc. Class A common stock for each share of Starwood Hotels & Resorts Worldwide, Inc. common stock.

Furthermore, Starwood shareholders will own approximately 34 percent of the combined company’s common stock after completion of the merger, based on current shares outstanding. One of the leading hotel and leisure companies in the world, Starwood’s portfolio includes nearly 1300 properties in 100 countries, as well as employing 188,000 people at its owned and managed properties.

As a result of the extensive due diligence and joint integration planning that has so far been carried out, Marriott is confident that it can achieve $250m in annual cost synergies within two years after closing – up from the $200m estimated in November 2015 when the merger agreement was first announced.

A global leading lodging company based in Bethesda, Maryland, with more than 4400 properties in 87 countries and territories, Marriot reported revenues of more than $14bn in fiscal year 2015.

“After careful analysis of the brand architecture and future development prospects, we are even more excited about the power of the combined companies and the upside growth opportunities,” said Arne Sorenson, president and chief executive of Marriott International. “We are also more confident of achieving our updated cost synergies. With a higher cash component in the purchase price, we have improved the transaction’s financial structure as well.

“We expect to accelerate the growth of Starwood’s brands, as well as leveraging Marriott’s worldwide hotel development organisation and owner and franchisee relationships. On the top line, combined sales expertise and increased account coverage should drive additional customer loyalty and increase revenue.”

And in a move which goes a long way towards completing the transaction, Marriott and Starwood have already obtained a number of the required regulatory consents, including clearing pre‐merger antitrust reviews in the US and Canada.

“We are pleased that Marriott has recognised the value that Starwood brings to this merger and enhanced the consideration being paid to Starwood shareholders,” said Bruce Duncan, chairman of Starwood Hotels & Resorts Worldwide. “We continue to be excited about the combination of Starwood and Marriott, which will create the world’s largest hotel company with an unparalleled platform for global growth in the upscale segment. We are also pleased with the progress the two companies have made toward closing.

“Throughout this process, our Board of Directors has remained laser‐focused on maximising value for Starwood shareholders, and Marriott’s revised offer provides the highest value to our shareholders through long‐term upside potential from shared synergies and ownership in one of the world’s most respected companies, as well as significant upfront cash consideration.”

During the course of the transaction, Lazard and Citigroup have served as financial advisers to Starwood. Deutsche Bank Securities has served as financial adviser to Marriott. Legal counsel to Starwood has been provided by Cravath, Swaine & Moore, with Gibson, Dunn acting in the same capacity for Marriot.

Subject to the successful completion of a number of special stockholder meetings, Marriot and Starwood are planning for the transaction to close in mid-2016.

An expectant Arne Sorensen said: “We are bringing together two of the most talented and experienced teams in the industry and together we will combine innovative ideas and service commitment to deliver unforgettable guest experiences.”

Fraser Tennant