Marriott International reached an amended agreement to acquire Starwood Hotels & Resorts after boosting its bid to $13.6 billion, which is 10% higher than the agreement the two companies reached in November and about 2% more than a competing bid that Anbang Insurance Group made last week.
Marriott and Starwood said Monday that Marriott would pay $79.53 a share for Starwood to create by far the world’s largest hotel company. Additionally, Marriott’s offer includes $20 per Starwood share in cash, up from $2 per share in cash in November.
Marriott also said Monday that the combined company will be able to reduce annual costs by $250 million a year within two years. Marriott previously estimated annual cost savings at $200 million.
Starwood’s termination fee for ending an agreement with Marriott has been increased to $450 million from $400 million. Both companies have agreed to convene stockholders meetings on March 28 to vote on the amended agreement.
“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,” Marriott CEO Arne Sorenson said in Monday’s statement.
“We are pleased that Marriott has recognized the value that Starwood brings to this merger and enhanced the consideration being paid to Starwood shareholders,” added Starwood Chairman Bruce Duncan in the statement.
Marriott outbid a group led by China-based Anbang, which on March 10 made an all-cash offer for Starwood for $76 per Starwood share, and last week raised it to $78 a share, or about $13.2 billion. Starwood said it would accept the offer and gave Marriott until March 28 to submit a counteroffer. The Anbang-led group also included J.C. Flowers & Co. and Primavera Capital Ltd.
Analysts said late last week that Marriott could very well boost its Starwood bid, though Marriott has apparently surpassed those analysts’ expectations. J.P. Morgan analyst Joseph Greff, in a note to clients Friday, estimated that there was a 40% chance Marriott would boost its bid by as much as $3.50 a share (or by about $600 million), while SunTrust Robinson Humphrey analyst C. Patrick Scholes, in a note to clients last Friday, wrote that Marriott would likely boost its offer “slightly.”
RBC Capital Markets analyst Wes Golladay said last Friday that Marriott may make a “marginally” higher offer of an additional $4 to $5 per Starwood share. He added that Marriott may have an additional advantage over Anbang because Anbang’s acquisitive activities might generate increased scrutiny from U.S. regulators, possibly lengthening the acquisition process and making Marriott’s offer look more attractive. Anbang has also agreed to acquire Strategic Hotels & Resorts for $6.5 billion, according a person familiar with that process.
Marriott first agreed to acquire Starwood last November for $72.08 a share, or about $12.2 billion. The combined company would include 30 brands, including Starwood’s Sheraton, W and St. Regis badges, and would total almost 5,700 hotels worldwide.