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Marriott sweetens deal and will merge with Starwood

March 23, 2016 Business News, Headline News No Comments Email Email

egtmedia59Starwood Hotels & Resorts will stay American, merging with Marriott International to create the world’s largest hotel company, with 30 brands and about 5700 hotels.

Marriott yesterday put paid to the prospect of a giant Chinese company taking over Starwood. The deal to merge Marriott and Starwood has now been signed.

Marriott sweetened its bid by lifting the amount of cash being offered to Starwood shareholders. That was enough to see off China’s Anbang Insurance Group, which in the weekend looked likely to pick up Starwood. See: America’s Starwood hotel group ‘about to turn Chinese’

Marriott International chief executive Arne Sorenson told US media yesterday that the opportunity to create a single loyalty program offered enormous potential.

That won’t happen soon, but in the longer term, a combined loyalty program would benefit from Starwood’s affluent lifestyle-and-luxury consumers and Marriott’s relationships with business travellers, Sorenson said.

Marriott considers the Marriott-Starwood combination will result in annual savings of USD 250 million.

The deal was struck when Starwood’s Board of Directors determined that the revised terms from Marriott were superior to the proposal by a consortium led by Anbang Insurance Group.

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

Marriott is confident it can achieve USD 250 million in annual cost synergies within two years after closing, up from USD 200 million estimated in November 2015 when announcing the original merger agreement.

The joint statement said the 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”.

Arne Sorenson, President and Chief Executive Officer of Marriott International, said: “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. We are also more confident of achieving our updated target of USD 250 million of cost synergies.  With a higher cash component in the purchase price, we have improved the transaction’s financial structure as well.

“We expect to accelerate the growth of Starwood’s brands, leveraging Marriott’s worldwide hotel development organization and owner and franchisee relationships. On the top line, combined sales expertise and increased account coverage should drive additional customer loyalty and increase revenue. Hotel level cost savings should benefit owners and franchisees, including better efficiencies in reservations, procurement and shared services.  The company will have a broader global footprint and the most powerful frequent traveller programs in the industry, strengthening Marriott’s ability to serve guests wherever they travel.

“We are also bringing together two of the most talented and experienced teams in the industry. Together, they will combine their innovative ideas and service commitment to deliver unforgettable guest experiences.”

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.  We are also pleased with the progress the two companies have made toward closing.

“Throughout this process, our Board of Directors has remained laser-focused on maximizing 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.

“With its asset light business model, multi-year industry leading unit growth, powerful brands, and consistent return of capital to shareholders, Marriott stock has consistently traded at valuation premiums to its public peers.”

Edited by Peter Needham


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