Marriott global to buy Starwood Hotels for $12.2B

Arne Sorenson will stay on as president and chief executive of Marriott, and the company’s board will expand to 14, adding three members from Starwood. Its headquarters will be in Bethesda Maryland.

Marriott said it expected to incur $US100 million-$US150 million in charges related to the deal and save at least $US200 million annually from the second year after the transaction closes.

Starwood indicated in April that it was seeking to reorganize or sell.

Since a year, Starwood stock was trading behind its peers, because of which its president and chief executive, Frits van Paasschen, stepped down and was replaced by Adam Aron, a director, on interim basis.

Marriott’s Mr. Sorenson said Marriott and Starwood haven’t started the process of antitrust review yet.

Sorenson said the merger should offer the consumer a broader choice of brands, improve the economics for franchisees and owners, increase the unit growth and enhance the long term value for shareholders.

Headquartered in Stamford, Connecticut, Starwood itself has ten brands that it owns, operates, franchises, and manages. Much of its focus had been in expanding its presence overseas. That will help Marriott well in its plans to increase its overall global footprint.

Starwood Hotels & Resorts Worldwide has more than 1,270 properties in a few 100 countries and over 180,000 employees at its owned and managed properties. The Tribute Portfolio is a collection of four-and five-star independent hotels.

Last month, the Chicago-headquartered Hyatt Hotels Corporation was linked with a takeover, and there was also speculation about a tie-up with InterContinental Hotels Group.

The deal comes a few seven months after Starwood said its board was exploring a sale of the business.

But Starwood remained leery of the Pritzkers’ control and also felt that a combination with Marriott, which has more brands across more price points than Hyatt, would be more diversified, this person said.

The Marriott Rewards program has 54 million members while Starwood Preferred Guest has 21 million.

Marriot will pay $72.08 a share in cash and stock for Starwood, while Starwood shareholders would own 37 percent of the combined company.

Assuming that it receives the appropriate shareholder backing, the deal is expected to close by mid-2016.

Total consideration to be paid by Marriott totals USD12.2 billion consisting of USD11.9 billion of Marriott worldwide stock, based on the 20-day VWAP (volume weighted average price) of Marriott stock ending on 13 November and USD340 million of cash, based on approximately 170 million fully diluted Starwood shares outstanding at 30 September.