It has now been around five months since Marriott set out to acquire Starwood Hotels and Resorts Worldwide Inc., initially at a price of US$10.8 billion which would creative a new world’s largest lodging group with a mind boggling 1.1 million rooms, 5,500 hotels spread across over 30 brands.
But there is another offer on the table, with the Beijing based Anbang Group founded only in 2004 to specialise in automotive and property partnering with J.C. Flowers and Company, and Primavera Capital countering with a bid of US$14 billion. Anbang is no stranger to the hospitality business having bought the Waldorf-Astoria in New York and more recently paying Blackstone US$6.5 billion for Strategic Hotels and Resorts Inc, which owned 16 luxury properties including the Four Seasons in Washington, D.C.
Of course there are concerns. Marriott calculate that the ‘merger’ would produce cost savings of at least US$200 million per year in the second year after closing, but this could well be brought about by various means including downsizing current staff levels. Loyalty members of both current groups are also expressing that such an arrangement would lead to a devaluation or dilution of existing ‘points’ or rewards.
This has become almost common practice among both hotels and airlines companies, seeing miles disappear or setting new restricted qualifying levels and expiry dates, making it even more difficult to redeem. If the Marriott deal goes ahead, it will also create the worlds’ largest hotel loyalty programme.
If Starwood decides to accept the increase revised Marriott bid of US$14 billion they would have to pay a US$400 million ‘breakup fee’ to Marriott. But it would also allow Marriott access to billions in real-estate assets that the company could sell to offset the cost of acquisition.
According to David Loeb, managing director of Milwaukee-based Baird Equity Research, the offer by Anbang is an all cash one and points out that ‘many investors prefer cash deals so they can decide whether or not they want to own Marriott stocks’.
Stock watchers currently estimate that the Marriott deal values Starwood at around US$62-$67 per share, versus the US$76 per share being offered by the consortium.
It’s easy to see the Chinese interest. Back in 2011, Starwood, then under the leadership of President and CEO, Frits van Paasschen, opened a new hotel in China every two weeks and currently approximately 12 per cent of the Starwood’s global portfolio is based in Greater China alone. There are also a number of potential ‘flies in the ointment ‘related to the Anbang deal, including the fact that their Waldorf-Astoria Hotel is managed by arch rival Hilton Worldwide.
Are there any possible ramifications for Barbados? Marriott of course has a small presence with its Courtyard brand. With the substantial Chinese investment in the new branded Wyndham Sam Lords Resort and possibly any interest they may have in the proposed 12 storey Hyatt Towers, would the Anbang acquisition be better for us?