Starwood Hotels accepts sweetened offer from Marriott

Starwood Hotels & Resorts has agreed to a revised bid from Marriott International at $79.53 per share or $13.6bn, which trumps the $13.2bn offered by a consortium led by China’s Anbang Insurance Group.

Under the terms of the amended merger agreement, Starwood shareholders will receive $21 in cash and 0.80 shares of Marriott International for each Starwood share.

Starwood shareholders will own approximately 34% of the combined company's common stock after completion of the merger, based on current shares outstanding.

In addition, Starwood stockholders are expected to receive separate consideration in the form of Interval Leisure Group common stock from the spinoff of the Starwood timeshare business and subsequent merger with ILG, currently valued at $5.83 per Starwood share, based on ILG's share price as of market close on 18 March.

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

“This revised agreement offers superior value for Starwood's shareholders, the ability to close quickly, and provides value creation potential that will allow both sets of shareholders to benefit from improved financial performance,” the companies said in a statement, adding that they have already obtained important regulatory consents necessary to complete the transaction, including clearing pre-merger antitrust reviews in the US and Canada.

Bruce Duncan, chairman of the board of directors of Starwood Hotels & Resorts Worldwide, said: "We are pleased that Marriott has recognized the value that Starwood brings to this merger and enhanced the consideration being paid to Starwood shareholders. We continue to be excited about the combination of Starwood and Marriott, which will create the world's largest hotel company with an unparalleled platform for global growth in the upscale segment.

"Throughout this process, our board of directors has remained laser-focused on maximising value for Starwood shareholders, and Marriott's revised offer provides the highest value to our shareholders through long-term upside potential from shared synergies and ownership in one of the world's most respected companies, as well as significant upfront cash consideration.”

Marriott expects the transaction to be roughly neutral to adjusted earnings per share in 2017 and 2018.

On Friday, Starwood announced plans to end its deal with Marriott in favour of what it deemed to a better offer from a consortium led by China’s Anbang Insurance Group, including JC Flowers & Co and Primavera Capital Limited.

Anbang had sweetened its previous buyout offer of $76 per share to $78 per share.

Should it choose to do so, Anbang now has until 8 April to outbid Marriott.

RBC Capital Markets said: “We continue to view Anbang as a company with lower return requirements and believe Anbang would need to bid at least $84 in order to compensate Starwood for a longer closing period and increased uncertainty on the regulatory front.”

At 1502 GMT, Starwood shares were up 4.1% to $83.90, while Marriott was down 1.2% to $72.31.