Marriott global Agrees to Buy Starwood Hotels & Resorts for $12.2B

For each share of stock, Starwood investors will receive $2.00 in cash and 0.92 shares of Marriott, with Marriott priced at $72.08 per share.

Just a few hours after the deal was announced on Monday, Starwood shares dropped 3.6 percent and closed at US$72.27 (AU$102.03), while Marriott witnessed a rise of 1.4 percent in shares, closing at US$73.72 (AU$104.07), reported BBC. In addition, shareholders will also receive $7.80 per share from the company’s timeshare business spinoff and the merger with Interval Leisure Group Inc.

Starwood owns 1,270 hotels and resorts around the world under 11 brands, including St. Regis, W Hotels, Sheraton, Westin, Le Meridien and others.

The deal is expected to close in mid-2016, the companies said.

Starwood’s brands will join such Marriott’s 19, which include The Ritz-Carlton, Residence Inn, and Courtyard.

Starwood, which opened a review into its strategy in April, had also been linked to deals with Intercontinental and Hyatt Hotels. 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.

Starwood’s fate has been up in the air since the beginning of this year when its CEO resigned abruptly amid concerns about flagging growth. The timeshare transaction should be complete prior to the Marriott-Starwood merger closing. Globally, the two have 5,600 hotels with 1.1 million rooms.

Marriott said it expects the move to add to its earnings by the second year, excluding transaction costs that are expected to total about $US100m to $US150m.

On completion of the transaction, Starwood’s lifestyle brands and worldwide footprint will combine with Marriott’s strong presence in the luxury and select-service tiers, as well as the convention and resort segment. This merger will result in a new world’s – largest hotel company.

A key question is the future of the two companies’ customer loyalty programs, Geerts said.

The companies said the deal would help Starwood accelerate the global growth of its brands by using Marriott’s relationships.

Mr Sorenson said he liked Starwood’s marketing and mix of worldwide properties.

“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.

Sorenson would remain president and chief executive of Marriott.