Marriott International, which has been engaged in a bidding war with a group led by China-based Anbang Insurance Group made for Starwood Hotels & Resorts, is unlikely to match the higher buyout the Anbang group made earlier this week, say analysts who cover both Marriott and Starwood.
Shareholders of Marriott, whose most recent $13.6 billion agreement was trumped by Anbang's $14.1 billion bid announced Monday, may be swayed by the potential impact of a higher bid on earnings per share as well a higher fee Starwood would have to pay if it terminates the Marriott agreement.
"We do not believe Marriott will be inclined to raise their offer significantly, nor do we believe they should," said SunTrust Robinson Humphrey analyst C. Patrick Scholes in a note to clients Monday.
The idea of a higher Marriott bid "may prove challenging in securing Marriott shareholder (or even its own Board) approval" because of the higher bid's potential impact on earnings per share, J.P. Morgan analyst Joseph Greff wrote in a separate note to clients Monday.
Starwood said early Monday that the Anbang-led group, which also includes J.C. Flowers & Co. and Primavera Capital Ltd., boosted its all-cash Starwood bid to $81 per Starwood share on March 26, then increased it to $82.75 a share, or about $14.1 billion. Marriott's March 21 agreement was for $79.53 a share, including $21 per Starwood share in cash. As part of that agreement, Starwood's termination fee was increased to $450 million from $400 million.
Marriott first reached an agreement to buy Starwood in November for about $12.2 billion.
Analysts were less certain about whether Starwood would ultimately accept the Anbang buyout. With little known about the insurance company in the U.S., its proposed buyout is likely to face greater scrutiny from U.S. regulators than Marriott, which has already cleared some U.S. and Canadian regulatory hurdles. That scrutiny may be further heightened because Anbang recently agreed to acquire Strategic Hotels & Resorts for $6.5 billion, according a person familiar with that process. Anbang last year bought New York's Waldorf Astoria hotel for $1.95 billion.
Starwood -- whose brands include W, Sheraton, Aloft and Westin -- said Monday that the Anbang bid is "reasonably likely to lead to a superior proposal" than Marriott's. Starwood added Monday that its board has not changed its recommendation to support the Marriott agreement.
"(Marriott) could close (the transaction) sooner, so you'd get your money sooner," said RBC Capital Markets analyst Wes Golladay. "Marriott could go lower (than Anbang's offer) and still be deemed superior."
By acquiring Starwood, Marriott would oversee a company that would include 30 brands and total almost 5,700 hotels worldwide.
Both companies started shareholders' meetings on Monday and have until April 8 to adjourn such meetings. Starwood shares closed at $83.66 on Wednesday, indicating investors' belief that the bidding war may still not be over.