Marriott Expands Overseas With Starwood Deal

The acquisition was unanimously approved by the boards of both companies, and is now awaiting the approval of investors in both hotel chains.

Historically, The Wall Street Journal said, Starwood “has been a strong performer in the high-end hotel market”. The pharmaceutical merger deal is estimated to be worth $116 billion.

Starwood shareholders will also get about $7.80 per share from the spin-off of its timeshare business and subsequent merger with Interval Leisure Group.

The offer price is $72.08, with Starwood trading just around $70.60.

The sources, who asked not to be identified because they were not authorized to speak on the record, said that Starwood left “no stone unturned” in its process of seeking a buyer.

It was in April this year that Starwood had indicated that it was considering strategic options. Most experts took that to mean the company would go up for sale. Since the time this announcement was made, there has been speculation regarding potential buy for Starwood. InterContinental Hotels Group was rumored to be interested in buying the company and Hyatt was also reportedly interested. Marriott climbed 2.4 percent to $74.49. However, talks ended, and the deal never came about. But it hasn’t done anything like the deal it announced today (Nov. 16).

Deutsche Bank served as adviser to Marriott.

“The economies of scale really matter in the lodging business because higher volumes on the reservation system can drive business to less-occupied properties on a given night”, said Mr James Corl, a managing director at real estate private equity firm Siguler Guff and Co. The company has expanded overseas faster than its rivals; roughly half of its more than 350,000 rooms are outside the US.

This morning before the market opened Marriott CEO Arne Sorenson appeared on CNBC’s Squawk Box to provide the first non-press release answers about the deal. Describing complexity of combining the two companies, he noted that “we’ll have our hands full”.

While Starwood is smaller than Marriott or Hilton, it has more hotels in China than any other USA hotelier, and an extensive operation in Hawaii.

Mr Sorenson said he liked Starwood’s marketing and mix of global properties. On a pro forma basis, Starwood shareholders would own approximately 37% of the combined company’s common stock after completion of the merger using fully diluted share counts as of 30 September, 2015. The company’s board of directors would increase to 14 after adding three members of Starwood’s board.

Marriott, based in Bethesda, Maryland, has been growing aggressively.

Although the deal has been formalised, it is expected to finally close in mid-2016.