The highlights of Marriott’s Starwood acquisition
The highlights of Marriott’s Starwood acquisition
20 SEPTEMBER 2016 8:40 AM

Marriott’s acquisition of Starwood has received final regulatory approval and is scheduled to close by 23 September. Here are the highlights of the landmark deal from the past year.

BETHESDA, Maryland—It’s official: Marriott International’s acquisition of Starwood Hotels & Resorts Worldwide received approval from the Chinese Ministry of Commerce this week and the transaction is expected to be completed before the market opens on 23 September.

It’s been nearly ten months since the transaction was first confirmed in mid-November 2015, but how did the two companies come to terms? Here’s a look at the highlights leading up to the final approval of the deal.

• From HNN: “What to know about Marriott’s Starwood deal” and “Starwood timeline: From strategic review to bidding war.”

The state of Starwood
During the final months before the November 2015 acquisition announcement, Starwood began to see the first tide of a sea change as company President and CEO Frits van Paasschen resigned from his position on 17 February 2015. After the appointment of interim CEO Adam Aron two months later, Starwood executives announced plans to conduct a strategic review to explore the company’s financial options. By the start of summer, Starwood launched Tribute Portfolio as a new soft brand and revealed a detailed strategy to refresh its Sheraton brand.

Through the rest of 2015, industry analysts and the media speculated any number of competitors could acquire Starwood, including InterContinental Hotels Group, Jin Jiang Hotels and Hyatt Hotels Corporation.

The announcement
On 16 November, Marriott ended the speculation of Starwood’s fate with the announcement the Bethesda, Maryland-based company would acquire Starwood for $12.2 billion. The deal included $11.9 billion of Marriott stock and $340 million in cash. At the time of the announcement, the combined company was projected to have 30 brands and about 1.1 million rooms in more than 5,500 properties worldwide.

In the days immediately after the acquisition was announced, owners of Marriott and Starwood properties seemed optimistic about the deal.

“We’re very comfortable with both systems,” said Gerry Chase, president of COO of New Castle Hotels & Resorts. “How they both get realigned and developed during the next couple of years, we’ll see how it affects that outcome. As long as the customer doesn’t lose in the acquisition, I think it’s got to be positive. I can’t think of any way where the customer doesn’t win out of this process.”

Industry CEOs shared their opinions on the Marriott/Starwood deal at the Americas Lodging Investment Summit.

“By and large it’s good,” said John Belden, president and CEO of Davidson Hotels & Resorts. “Starwood’s a wonderful company, but they’ve been drifting for a few years in terms of having the right leadership running the organization with the right focus on the hotel business. (Starwood) lost their way with the brands that they have, and there’s nobody that runs a better brand than Marriott.”

The logistics of the deal
Once the initial shock of the news started to subside, industry insiders began to analyze how the addition of Starwood could bolster Marriott. Two significant questions surrounding the deal include how Marriott will manage a portfolio of 30 brands—including some from both companies that overlap with each other—and how the Marriott Rewards and Starwood Preferred Guest loyalty programs will be combined.

Analysts said it is imperative that Marriott improve Starwood’s Sheraton brand and pointed to Four Points by Sheraton brand as a likely candidate for the cutting-room floor. However, there’s still a lot of speculation when it comes to trying to determine the fate of so many brands.

“It gets more complicated when you’re talking about the difference between the Tributes and the Autographs,” said David Loeb, senior research analyst and managing director for Robert W. Baird & Company. “But you can have a Tribute next to an Autograph. In a crowded hotel market, you can have a lot of presence without a brand next door to itself.”

On 22 December, Marriott filed a 295-page report with the U.S. Securities Exchange Commission, which detailed its proposed acquisition of Starwood. Highlights of the document include that 10 additional companies besides Marriott expressed serious interest in acquiring Starwood, and Marriott was at one time out of the running before returning to the table with the deal Starwood executives would accept.

In comes Anbang
On 14 March 2016, a consortium led by Beijing-based Anbang Insurance Group submitted an unsolicited offer to acquire Starwood with an all-cash bid and buy all outstanding Starwood common stock for $76 per share. Over the next several weeks, Anbang and Marriott engaged in a bidding war to acquire Starwood.

But by the end of March, Anbang ended its pursuit of Starwood, withdrawing an $82.75-per-share all-cash bid for the company. With Anbang out of the picture, Starwood executives recommended shareholders approve Marriott’s 21 March revised acquisition agreement, which was valued at $13.3 billion—including $9.7 billion of Marriott stock and $3.6 billion in cash. On 8 April, shareholders from both Starwood and Marriott approved the deal.

The road to final approval
After the conclusion of the Anbang-Marriott bidding war, the hotel industry began to prepare for the close of the deal as Marriott’s acquisition of Starwood achieved the approval of affected countries and global bodies like the European Union’s European Commission. China was the last country to approve the deal, following several extended periods of review.

But with the approach of the transaction’s close, questions about the impact of the megadeal began to surface, including how hotel owners will be affected and how quickly other major brand companies will continue to consolidate. In a separate interview with HNN during the NYU International Hospitality Industry Investment Conference, Marriott EVP and Global Chief Development Officer Anthony Capuano spoke positively about the deal in the remaining weeks before final approval.

“We continue to have a strong volume of deals here and around the world, and Starwood is having record volumes of deal intake,” Capuano said. “It’s reflective of the investment community’s appetite and enthusiasm for what the power of the combined companies will be.”

-Compiled by Dan Kubacki.

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