Stories by Demola Ojo
Anbang Insurance Group Co. has walked away from its $13 billion bid to buy Starwood Hotels, a surprise move that caps off a three-week bidding war with Marriott International. Starwood had been in discussion with Anbang and its partners—private-equity firms J.C. Flowers & Co. and Primavera Capital Group— over the possibility of an improved offer despite plans underway to merge with Marriot.
However Anbang said in a statement two days ago that they decided to abandon their Starwood bid “due to various market considerations.” They didn’t elaborate in the statement.
This took place just a few days after Starwood announced the likelihood of “an improved offer” from Anbang. The merger between Starwood and Marriot was earlier derailed at the eleventh hour by the offer from Anbang only for Marriott to make an improved offer.
Starwood Hotels confirmed mid-March that it received an “Unsolicited Acquisition Proposal” from the Chinese-led consortium, valuing the group at around $13 billion or $76 per share.
The abrupt withdrawal appears to end a topsy-turvy bidding war that highlights both the newfound muscle of Chinese companies in the high-stakes global business of mergers and acquisitions, and questions surrounding their ability to close such deals.
So far this year, there have been $92 billion of foreign takeovers announced by Chinese companies, according to Dealogic, excluding the erstwhile Anbang bid for Starwood, a pace that far exceeds that of any prior year.
But US regulators still must sign off on many of the deals, and there has been a swirl of political opposition in Washington.
Anbang, an insurance company founded in 2004, has an opaque ownership structure, with multiple layers of holding companies registered across China, the Wall Street Journal reported last week. Some insurance analysts have warned that the company’s recent acquisition spree, which includes paying nearly $2 billion for the Waldorf Astoria hotel in Manhattan, could be straining its balance sheet, and it is unclear whether Chinese authorities approve of it.
Starwood will now stick with Marriott’s most recent offer, a cash-and-stock bid currently worth $77.94 per share. At the new price, Anbang effectively forced Marriott to pay more than $1 billion extra for Starwood.
Under the revised Marriott deal, Starwood shareholders would receive $21 in cash and 0.8 Marriott share for each Starwood share. Marriott and Starwood stockholders are scheduled to vote on the transaction on April 8. If approved by regulators and shareholders, the deal could close in mid-2016, the companies have said.
Marriott hopes to double in size as a result of the merger. The proposed merger will see the combined group have over 123,000 opened or signed rooms when Marriott’s 61,000 open rooms join with Starwood’s 40,500 open rooms, and the combined pipeline totals 21,500 rooms.