Anbang outbids Marriott once again, in the Battle of Starwood

The Battle of Starwood is hotting up more than I ever thought it would. A few hours ago, the consortium led by Chinese insurance group Anbang has put in an all-cash US$14 billion offer for Starwood, topping Marriott's $13.6 billion offer that was made last week. Here's more.

Pic courtesy: WSJ

Quick recap. Marriott proposed to acquire Starwood last November, after many months of speculation around IHG, Hyatt and Wyndham hotels being other possible suitors. In the middle of March 2016 (yes, just a couple of weeks back), Anbang's consortium put in a rival bid for Starwood, bettering Marriott's original $12.2 billion bid by a whole $1 billion, at $13.2 billion. Even so, Starwood's board did not change its recommendation to its shareholders, who vote on 8 April 2016 on this matter. And then Marriott put in a counter bid which was considered superior, at $13.6 billion.

According to the Wall Street Journal, "Starwood said the new offer from Anbang, a Chinese insurance giant, is likely to be a “superior proposal” to Starwood’s $13.6 billion takeover agreement with Marriott. Such a designation allows Starwood to engage in discussions with and provide diligence information to the consortium in connection with its proposal."

However, it also added that "Marriott on Monday reaffirmed its commitment to acquiring Starwood, arguing that its deal was the best course because the combined company would have a larger global footprint with a wider choice of brands for consumers. In addition, Marriott warned Starwood stockholders about getting lured by the higher offer."

A price war is certainly not what Marriott would want to engage in at this stage. In one of my earlier posts, I had commented that Starwood should (would?) go with Marriott because of the synergies that such a combination would offer, as opposed to being acquired by Anbang. With the bidding war now firmly in place, all bets are off! 

There's also a $450 million break up fee plus $18 million of legal costs that Marriott will recover from Starwood, should Anbang be the chosen one. Of course, a portion of that $450 million will be funded by Anbang, which helps Starwood by that much. Also, Gary Leff (View from the wing) wrote yesterday about the golden parachute deals that Starwood's executives will get from a successful deal, which will only increase as the offer price moves north.

Much as my view may be against popular sentiment, I'm all for Marriott acquiring Starwood, and not Anbang. However, to put things in perspective, Marriott's original bid last year (stock plus very little cash) valued Starwood at $72.08 a share. Today's bid by Anbang is for cash, at $82.75 per share of Starwood. That's a near 15% difference! Therefore, as I said, all bets are off on who will eventually acquire Starwood. While we will keep you posted of developments, it is up to Starwood's shareholders to eventually decide, when they vote on 8 April 2016.