The Starwood Board of Directors just announced that the company will accept the superior cash offer of 78 USD per share placed by Anbang Insurance Group Co., Ltd. over the initial offer of Marriott Hotels.
The Anbang ‘Consortium’ offer is roughly 15% higher than the initial one placed by Marriott so it’s logical that in the interest of the shareholders the higher offer was considered, especially since it’s in cash.
John wrote about the bid when the news broke (access here).
With all the up and down, deadlines and news from all different sides people start to get confused, even though our readers primary concern is the effect the acquisition will have on their loyalty accounts.
Starwood published a press release a few hours ago (see here).
Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) (“Starwood”) today announced that it has received a revised binding and fully financed proposal from a consortium consisting of Anbang Insurance Group Co., Ltd., J.C. Flowers & Co. and Primavera Capital Limited (the “Consortium”), that the Starwood Board of Directors, in consultation with its legal and financial advisors, has determined constitutes a “Superior Proposal,” as defined in Starwood’s merger agreement with Marriott International, Inc. (NASDAQ: MAR) (“Marriott”). …
The Starwood Board believes that the binding and fully financed proposal from the Consortium provides a high degree of closing certainty. …
Consistent with the terms of the Marriott merger agreement, Marriott has the right until 11:59 p.m. ET on March 28, 2016 to negotiate revisions to the existing merger agreement between Marriott and Starwood so that the proposal from the Consortium no longer constitutes a “Superior Proposal”. Starwood will negotiate in good faith with Marriott during this period, and the Starwood Board will consider in good faith any changes to the Marriott agreement that Marriott may propose during this period.
Starwood is not permitted to terminate the Marriott agreement to enter into the Consortium’s binding agreement unless the Starwood Board has determined that the Consortium’s offer continues to be a “Superior Proposal” once the negotiation period with Marriott has concluded, and taking into account any revisions to the existing Marriott agreement that are proposed by Marriott during this period.
Where does this leave Starwood? Well for now they are in a limbo because Marriott has 10 days to up their offer or withdraw and receive a 400 Million $ ‘termination penalty’ payment in cash. Until Marriott made their decision nothing is final in this matter.
Even if Marriott does raise their offer for Starwood I’d expect the consortium to engage in at least one followup bid. The Chinese have a lot of cash to throw around and you don’t make a bold move like this last minute rival bid if you don’t plan on following up on it.
It’s a very likely possibility that a bidding war could break out even though I don’t think it will be an all out battle. It all depends how interested Marriott really is or if they consider the 400 Million easy earned money (not sure who will be liable for the legal fees involved though).
Starwood Stock went over 80 US$ today, two US$ higher than the actual takeover offer. Within one month the stock rose by 20%.
It now all depends on Marriott and how valuable they consider Starwood to be. Not only would Marriott need to up their offer way beyond their original proposal but it also requires a lot more cash (the initial offer consisted of $10.5 billion of Marriott common stock as well as 339 Million USD in cash). This option is certainly out the window now so is Marriott prepared and financially in shape to cough up the entire elevated sum in cash? Let’s wait and see.