Starwood Hotels and Resorts Worldwide (HOT ), founded in 1969, is an American hotel and leisure company with headquarters in Stamford, Connecticut. It is one of the world's largest hotel companies and owns 11 brands. The brands are world-renowned and include Westin, Sheraton, The Luxury Collection, Four Points by Sheraton, W Hotels, St. Regis, Le Méridien, Aloft, Element by Westin, Tribute Portfolio, and Design Hotels. Its Starwood Preferred Guest program, based on an old partnership with American Express (AXP ), is one of the most popular and coveted rewards programs in the world with over 21 million members. Marriott International (MAR ) is another American hospitality company that owns 19 brands and over 4,000 properties internationally.The bid controversy began in November 2015, when Starwood and Marriott International agreed to an acquisition deal in which the Marriott would buy Starwood for .92 shares of Marriott stock plus $2 per Starwood share, a value of about $12.2 billion then. The acquisition would create the world's largest hotel company, controlling more than 5,500 hotels and 1.1 million rooms, and be subject to antitrust scrutiny. However, in a stunning turn of events, a Chinese company offered an unsolicited larger bid to Starwood earlier last week. The Chinese giant Anbang Insurance Group Co. offered a deal of $76 per share, valued at roughly $13 billion. On Friday morning, Anbang raised its bid to $78 per share, or $13.2 billion, prompting Starwood to state that it will terminate its agreement with Marriott in favor of Anbang's deal, according to the Wall Street Journal's "Starwood Says Boosted Anbang Bid Tops Marriott Agreement." But on Monday, Marriott too raised its offer to $13.6 billion, changing from $2 to $21 cash per Starwood share. Starwood has accepted the new offer. Though Anbang did not comment, it could continue the bidding war, if it so desires.
What are the implications of the bid controversy? First, it signals the increasing desire of Chinese capital to invest abroad and complete takeovers. In recent history, there were Chinese takeover bids for General Electric's (GE ) appliance unit and Syngenta AG (SYT ), a $43 billion deal. With a sluggish, decelerating economy in China, companies and investors are eager to look beyond their borders for greater opportunities and returns. The Beijing-based Anbang, which has done about $28 billion worth of deals, is no exception. According to the Wall Street Journal's "Starwood Gets Offer From Group Led by Anbang, Threatening Marriott Deal", what began as a provincial car insurance provider in Anbang has grown through purchases of insurers in South Korea, Europe, and the US into a seller of high-yield investment products and an aggressive foreign acquirer partnered with Chinese private equity firms. Anbang's Chief Executive Officer Wu Xiaohui has stressed due diligence in hunting for deals and stated his wish to represent "Chinese enterprises going global." American and western investors should stay alert for new takeover bids by Chinese firms, as China attempts to pivot to become a more important player in financial capitalism. But for right now, it is up to Anbang to answer.
The author does not hold any positions in any of the stocks above.