Marriott $13.6 bn bid for Starwood Hotels tops China's Anbang

Marriott International is close to winning a bidding war for Starwood Hotels & Resorts that would create the global hotel leader, trumping an offer from China's Anbang.

Marriott improved its November cash-and-stock offer for Starwood by more than $1 billion, to $13.6 billion, in an amended deal approved by their respective boards of directors, the companies announced in a joint statement Monday.

"The companies have signed an amendment to their definitive merger agreement that creates the world's largest hotel company," they said.

The merger would combine Marriott's more than 4,400 properties worldwide, with a portfolio of brands including The Ritz-Carlton, JW Marriott and Gaylord Hotels, with Starwood's 1,270 properties in 100 countries and the Westin and W brands among others.

The merger will help Marriott expand in China, India and Europe, regions where Starwood has a strong presence.

"After five months of extensive due diligence and joint integration planning with Starwood, including a careful analysis of the brand architecture and future development prospects, we are even more excited about the power of the combined companies and the upside growth opportunities," said Arne Sorenson, president and chief executive of Marriott.

Marriott said it is confident it can achieve $250 million in annual cost synergies within two years after closing, raising it from $200 million estimated in November 2015 when the two announced their original merger agreement.

Marriott substantially improved the cash component of its offer. The amended deal has Starwood receiving $21 in cash and 0.8 share of Marriott stock for each share of Starwood. Under the terms of the November agreement it was $2 and 0.92 share.

On Friday Starwood had announced it favored the offer from a consortium led by Anbang of $13.2 billion, or $78 per share, and would notify Marriott that their agreed merger was off.

Anbang offer not 'superior'

But on Monday, Starwood said it no longer viewed the Anbang bid as "superior", ending talks with the insurer and its partners, China-based Primavera Capital and US private equity investor JC Flowers & Co.

Marriott and Starwood said they had already cleared potential regulatory hurdles for their tie-up, including pre-merger antitrust reviews in the US and Canada. The companies agreed to hold shareholder meetings on March 28 to vote on the merger.

They said they expect the deal to close by mid-2016.

"The company will have a broader global footprint and the most powerful frequent traveler programs in the industry, strengthening Marriott's ability to serve guests wherever they travel," Sorenson said.

Shares in Marriott were down 1.1 percent at $72.34 after an hour of trade; Starwood leaped 4.2 percent to $83.95.

Starwood would have to pay Marriott a $450 million break-up fee if it decides to terminate the amended merger deal, up from $400 million in the original agreement.

RBC Capital Markets analysts said in a client note that if Anbang wants to Pursue Starwood, it would need to bid "at least $84 in order to compensate Starwood for a longer closing period and increased uncertainty on the regulatory front."

The deep-pocketed Chinese company has been on a shopping spree in the US hotel sector.

In October 2014 it acquired the landmark Waldorf Astoria Hotel in Manhattan for nearly $2 billion from Hilton Worldwide Holdings.

Then last week, in addition to the Starwood bid, it announced the $6.5 billion purchase of Strategic Hotels & Resorts from Blackstone.

The Strategic purchase comprises 16 luxury hotels and resorts in the US, including the JW Marriott Essex House in Manhattan and the Hotel Del Coronado in San Diego.