UPDATE 6-Starwood gets $13 bln bid from Anbang, tops Marriott offer – Reuters

7 months ago Comments Off on UPDATE 6-Starwood gets $13 bln bid from Anbang, tops Marriott offer – Reuters

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By Michael Erman and Diane Bartz

March 18 Starwood Hotels & Resorts Worldwide Inc
on Friday said a $13 billion cash offer from China’s
Anbang Insurance Group Co was superior to one from Marriott
International Inc, setting the stage for the
largest-ever deal by a Chinese company in the United States.

The operator of Sheraton and Westin hotels said the Chinese
insurer’s offer beat Marriott’s previously agreed cash and stock
offer by nearly 15 percent, and that it planned to scrap the
proposed deal with the rival hotel chain.

Anbang has been on a U.S. hotel buying spree as Chinese
insurers rush to acquire cash-generating assets as they struggle
to keep up with the policy liabilities of the country’s aging
population. U.S. assets are also seen as a good hedge against
weakness in the Chinese yuan currency.

The Anbang-led consortium – which also includes private
equity firms J.C. Flowers & Co from the United States and
Primavera Capital from China – has bid $78 per share in cash, or
$13.16 billion overall, based on shares outstanding as of Feb.
19. Anbang’s bid is binding and fully financed, Starwood said.

At Thursday’s close, Marriott’s bid for Starwood was worth
$68.06 per share, or around $11.5 billion overall.

Starwood will have to pay a $400 million breakup fee to
Marriott if it walks away from their deal. Starwood’s shares
were up 5 percent at $80.20 in afternoon trading, their highest
level since November.

Marriott, which has until March 28 to counter Anbang’s
offer, said it was considering its options.

Dan Wasiolek, a hotel industry analyst at Morningstar, said
Marriott could still counter with a higher offer.

“Marriott can increase their offer because they have the
balance sheet flexibility,” he said, suggesting the larger rival
hotel company could sweeten its offer by $700 million in cash.

If Anbang’s offer is successful, it would boost the
company’s reputation as one of China’s top corporate acquirers,
adding Starwood to its stable with its nearly 1,300 hotels in
about 100 countries. Starwood brings with it several
well-regarded hotel brands as well as a loyal business customer

The offer follows Anbang’s $6.5 billion deal struck last
week for Strategic Hotels & Resorts Inc and its $2 billion
purchase of New York’s iconic Waldorf Astoria hotel last year.

John Paulson, president of hedge fund Paulson & Co,
Starwood’s largest shareholder, welcomed Anbang’s sweetened
offer, saying it “better reflects the value of Starwood.” He
called the Chinese company a “proven, sophisticated buyer of
related assets.”

Beijing-based Anbang’s bid for Starwood epitomizes its
meteoric rise since it was founded in 2014 with an initial focus
on car insurance.

Thanks to a spate of dealmaking at home and abroad,
privately held Anbang now manages more than 1.9 trillion yuan
($292.3 billion) in assets, according to its website. Its
chairman Wu Xiaohui married the granddaughter of former Chinese
leader Deng Xiaoping.


A deal with Anbang would likely face a review by the U.S.
Committee on Foreign Investment in the United States, an
interagency panel that reviews deals to ensure they do not harm
national security.

A CFIUS probe would take around 10 weeks and would focus on
the proximity of Starwood’s several hundred U.S. hotels to
critical facilities and the protection of customers’ privacy,
such as credit card data and information that passes through
hotel Wi-Fi, said a source close to the deal.

Anbang won approval to buy the Waldorf Astoria last year and
to buy annuities and life insurer Fidelity & Guaranty Life just
this week, giving it confidence that it can also win approval
for the Starwood deal, the source said.

In 2012, CFIUS ordered the purchase of a wind farm in Oregon
to be reversed because it was too close to a naval base.

Stephen Heifetz, a partner with law firm Steptoe & Johnson
LLP, said this was unlikely in this case.

“I’d be surprised if there were any deal-killer for a large
multi-property location,” he said, although he warned that the
companies might have to make some concessions to get the deal

Other CFIUS experts have said previously that U.S.
regulators might be concerned about a Starwood property, the W
Hotel in downtown Washington, which overlooks the U.S. Treasury
Department and the White House.

The U.S. government would also likely reconsider allowing
some government officials to stay in the chain’s hotels, said
Michael Wessel, a commissioner on Congress’s U.S.-China Economic
and Security Review Commission.

“Anbang may have to requalify the chain for coverage under
federal travel regulations,” he said. “If any individual
properties posed a problem, one of the mitigation strategies
could either be the sale of problem assets to another chain or
potentially to limit reimbursement for government employees on
government business at those properties.”

In either deal, Starwood shareholders will also receive
stock in Interval Leisure Group Inc, which is buying
Starwood’s vacation ownership business for about $5.67 per
Starwood share.

Lazard and Citigroup Global Markets Inc are financial
advisers to Starwood and Cravath, Swaine & Moore LLP is its
legal counsel. PJT Partners Inc is Anbang’s financial
adviser, while Skadden, Arps, Slate, Meagher & Flom LLP is its
legal counsel.

(Reporting by Arunima Banerjee and Sayantani Ghosh in
Bengaluru, Michael Erman and Jeffrey Dastin in New York and
Diane Bartz in Washington; Editing by Kirti Pandey, Ted Kerr and
Bill Rigby)

UPDATE 6-Starwood gets $13 bln bid from Anbang, tops Marriott offer – Reuters