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Chinese Insurance Company Which Bought Waldorf Astoria Submits "Hostel Bid" For Marriott Hotels

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The "hostel takeover" saga for Starwood Hotels took another unexpected turn this morning, when the company's stock price soared following news that the hotel chain had received an unsolicited $76/share non-binding proposal (8% premium to the Friday close) from an investor group led by China’s Anbang Insurance Group, in a deal that seeks to scuttle its planned combination with Marriott International. The proposed deal values Starwood, one of the world's largest hotel companies which includes such brands as Westin, Sheraton, The Luxury Collection, W Hotels, St. Regis, Le Meridien and many others, at $12.8 billion.

 

Early on Monday Marriott issued a press release announcing it was still committed to the proposed tie-up with Starwood, said the consortium was led by Anbang, which in October of 2014 struck a deal to buy Hilton Worldwide Holdings Inc.’s flagship hotel, the historic Waldorf Astoria in Manhattan, for $1.95 billion. To wit:

 

On March 11, 2016 Starwood notified Marriott that it had received an unsolicited indication of interest in purchasing Starwood from a consortium of potential investors, led by Anbang Insurance Group. Marriott notes that this unsolicited indication of interest is highly conditional and non-binding. Marriott granted Starwood a waiver to expedite its evaluation of the letter from the interested consortium.

 

Starwood’s deal with Marriott includes a period during which it can consider other offers; that time frame expires at 11:59 p.m. Eastern Time on March 17. The press releases also aded the following:

 

Marriott will monitor this development as it and Starwood continue to work toward the closing of its transaction and the successful integration of the two companies in anticipation of votes by each company's stockholders on March 28, 2016.

 

 

 

Starwood stated today that its Board of Directors has not changed its recommendation in support of Starwood's merger with Marriott.
Starwood has said that its Board, in consultation with its legal and financial advisors, will carefully consider the outcome of its discussions with the consortium in order to determine the course of action that it determines is in the best interest of Starwood and its stockholders.

 

Starwood does not plan to comment further on discussions before the expiration of the waiver period on Thursday night.

 

As a reminder, Marriott agreed to acquire Starwood in November. The combination would create the No. 1 hotel company globally-with more than a million rooms-and bring together 30 brands across all lodging segments, from Starwood’s higher-end W Hotels, St. Regis and Westin brands to Marriott’s limited-service offerings like Courtyard by Marriott and its extended-stay chain Residence Inn.

 

Stepping back from the deal itself, what this last minute proposal by a Chinese insurance group represents is nothing more than another "innovative" attempt to park capital outside of the country.

 

Recall that over the weekend, the PBOC cracked down on various schemes enabling capital outflows outside of China. So what better way to transfer funds from China abroad, than to move away from one-off purchases of Vancouver real estate at ridiculous prices than to engage in wholesale M&A in the US, only this time at ridiculous valuations?

 

We expect a bidding war, even more acquisitions by Chinese insurance companies of US businesses, and ultimately, the involvement of Congress which will surely chime in on this Chinese attempt to acquire core US businesses in what is nothing more than more "streamlined" capital flows outside of China.

 

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