Bidding war heats up as Anbang sweetens offer for Starwood

The bidding war for Starwood Hotels & Resorts heated up as a consortium led by Anbang Insurance Group lifted its offer for the company to $14bn, trumping Marriott International’s $13.6bn.

Starwood said it was in discussions with Anbang after it lifted its offer to $82.75 per share from $78 per share. This was the second time the Anbang consortium – which includes JC Flowers & Co and Primavera Capital – upped its bid, having initially offered $76 per share.

The hotel group said it “will carefully consider the outcome of its discussions with the consortium in order to determine the course of action that is in the best interest of Starwood and its stockholders”.

“There can be no assurance that discussions will result in a binding proposal from the consortium, that the Starwood board will determine that any such proposal is a ‘superior proposal’ or that a transaction with the consortium will be approved or consummated on any particular terms or at all.”

Starwood, which owns the Sheraton and Westin brands, said it has not changed its recommendation in support of the merger with Marriott.

Meanwhile, Marriott responded to news of Anbang’s sweetened offer by reaffirming its commitment to acquire Starwood and saying it was confident the previously announced merger agreement was the best course for both companies.

“The combined company will offer stockholders significant equity upside and greater long-term value driven by a larger global footprint, wider choice of brands for consumers, substantial revenue synergies, and improved economics to owners and franchisees leading to accelerated global growth and continued strong returns,” Marriott said.

Nomura said Marriott remains the better long-term partner for Starwood due the possible cost and revenue synergies gained by joining the businesses.

“However, we believe that if Marriott does not counter bid, and we doubt it will, Starwood’s board will accept the higher, all cash, offer from the Anbang consortium.”

As far as Marriott is concerned, it said losing the battle may be a near-term positive for the stock.

“If Marriott does not raise its bid again (and, again we believe it should not), then it collects a $450m breakup fee and short positions in the stock would be covered quickly, driving shares higher. The most recent data from NASDAQ indicates that around 24% of Marriott’s float is short.”

Meanwhile, RBC Capital Markets analyst Wes Golladay said news of Anbang’s latest bid was positive for both Starwood and Marriott, as Starwood shareholders would receive 9% more for their shares versus Marriot's bid, while the latter would get the $450m termination fees and an additional $18m in termination-related fees.

“We continue to believe that Marriott is at a disadvantage bidding against Anbang, given our view that Anbang is an uneconomic buyer looking to get money out of China and into a the less volatile US market,” he said.

Like Nomura, RBC does not expect Marriott to raise its offer.