Marriott’s year-long pursuit of Starwood Hotels & Resorts, which set off a fierce bidding war, is nearing completion.
The hotel giant on Tuesday said it had cleared the last hurdle – a green light from Chinese regulators – in its $13.6 billion takeover of Starwood, putting it on track to become the world’s largest hotelier by Friday.
Under the terms of the deal, Starwood shareholders will receive $21 in cash and 0.8 shares of Marriott’s stock for each share of Starwood’s stock. The company plans to delist Starwood shares from the New York Stock Exchange before markets open Friday.
“This is a transformative deal, the kind you only see once in a generation,” said Rachael Rothman, an analyst for Susquehanna Financial Group in New York. “Clearly it’s going to empower Marriott’s brand.”
Maryland-based Marriott, which will soon have 1.1. million rooms worldwide and nearly $20 billion in annual revenue, earlier this year emerged as the winner in what became an international bidding war for Connecticut-based Starwood.
Marriott last November announced plans to buy Starwood for $12.2 billion. Weeks before shareholders were to vote on the merger, a business group led by China’s Anbang Insurance Group swooped in with an unsolicited, all-cash offer of $12.8 billion for the Starwood. Marriott upped its offer to $13.6 billion; Anbang followed suit with a $14 billion bid.
In late March, Anbang withdrew its offer without explanation. Shareholders of Marriott and Starwood approved the planned merger in early April.
The deal hit another snag last month, when the Chinese Ministry of Commerce requested additional time to review the terms. Marriott had already received approvals from regulators in 40 countries, including the United States and the European Union, and had expected to finalize the acquisition by mid-year.
The deal brings together 30 brands, including Marriott’s Ritz-Carlton, Courtyard and Renaissance Hotels with Starwood’s St. Regis, Sheraton and W Hotels.
Marriott’s chief executive Arne M. Sorenson said the company was drawn to Starwood because of its global presence, strong rewards program and popularity among younger travelers. He also said he expected a merger with Starwood to save $250 million in annual costs within two years.
“By combining these two platforms, we will be a bigger buyer of tomatoes or reservations or systems,” Sorenson said in an April call with investors. “All of the hotels will benefit from that.”
Marriott executives have said one of the most important issues going forward is to successfully combine Marriott and Starwood’s large loyalty rewards programs – with 54 million members and 21 million members, respectively. Marriott executives have begun rolling out changes to its rewards program – for example, making late check-out more freely available , offering a concierge service for its most elite members – in an effort to bring it more in line with Starwood’s.
“How is this going to come together? It’s a question on everyone’s minds,” said David Loeb, a lodging analyst at investment firm Robert W. Baird & Co. “Customer loyalty is what this [industry] is all about, and Marriott is going to want to attract and retain those loyal Starwood customers.”