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When we think back to 2015 and all of the growth and change the hospitality industry saw, it’s tough to forget about a major acquisition that took center stage towards the end of the year, Marriott acquiring Starwood. Need a little refresh on the deal? Check it out here. The deal seemed great, Marriott was to acquire Starwood for $12.2B making them the largest hotel brand in the world.

As 2015 came to a close and the hustle and bustle of a new year began, we didn’t hear much about Marriott’s acquisition of Starwood until the recent weeks when Anbang came into the picture.

An Who?

The name Anbang didn’t ring a bell to most which makes sense considering it’s an insurance group based out of Beijing. Why would a Chinese insurance group want to acquire Starwood Hotels? Well, Anbang has begun to show a great interest in the hotel business over the last few years. Anbang purchased the Waldorf-Astoria in New York for $1.95B – making it the highest price ever paid for a U.S. hotel.

Anbang doesn’t seem to be showing any signs of slowing down either, they’re working with Blackstone to purchase their Strategic Hotels & Resorts portfolio that represents 12 hotels with 7,921 rooms.

The Bidding War

With Anbang entering the picture, Marriott’s acquisition of Starwood was going to go from smooth sailing to quite a bumpy road. On March 13th, Anbang put in a $13B cash bid for Starwood. This bid would value Starwood stock at $76/share and is $800M higher than Marriott’s offer. Plus, money talks and Anbang is talking in all cash.

This had to have come as a shock to the system for Marriott, and before they even had time to counter Anbang raised their original bid to $78/share, bringing their offer to $13.2B.

With Anbang making moves fast, Starwood accepted the second Anbang offer on March 18th, allowing Marriott some time to counter.

While waiting to counter, Marriott reaffirmed that their deal was better than anything Anbang has brought forward, highlighting that the longevity and potential money to be made outweighs Anbang’s all cash offer.

On the other hand, Starwood viewed Anbang’s offer as superior.

Marriott was quick to act, and on March 21st they countered with an offer totalling $13.6B. With this offer, they raised an initial breakup fee to $450M plus another $18M in costs incurred by financing the offer. So, even if Starwood chooses Anbang, Marriott still makes out with $468M.

Anbang wasn’t going to sit quiet, they responded with a $13.8B cash offer, equaling out to $82.75 per share.

Current Offers

Marriott:

  • $10B in stock based on $79.53 Starwood share and $73.16 Marriott Share
  • $3.6B cash
  • $14.2B with vacation rental business

 

Anbang:

  • $13.8B based on $82.75/share in cash
  • $14.2B with vacation rental business

Decisions Decisions…

As of now, Marriott’s offer is more favorable to Starwood shareholders, but they have time to mull over Anbang’s all-cash offer.

On the other hand, Marriott has raised their offer $1.4B since November of last year. They have options in this too. If Anbang’s offer gets accepted, Marriott walks away with $468M but have lost out on the deal-of-a-lifetime. They’re committed to seeing  this deal through, but have to do what makes the most economical sense.

If Anbang’s deal gets accepted, they have some hoops to jump through. First of all, their deal is not fully financed, and with the price continuing to rise it could be difficult to ever see that happen. (Which could be extremely good for Marriott.) Also, being a Chinese company they’ll have plenty of legal hurdles to jump through in both China and America when it comes to making this deal completely go through.

This deal could either make Anbang a household name in the hotel industry, or create the biggest hotel brand in the world between Marriott and Starwood. Either way, it will make the competition with these brands tougher for everyone around.

As the story continues to develop, check out Skift for the latest updates.