Looking To Add To Its Trophies, China's Anbang Bids For Starwood

China’s Anbang Insurance Group, which already owns the Waldorf- Astoria in Manhattan, is leading a consortium of investors who have made an unsolicited $12.8 billion cash bid for Starwood Hotels & Resorts, bettering the surprise $12.2 billion cash-and-stock offer Marriott International put forth in November for the parent of 11 high-end brands, including Westin, Sheraton and St. Regis. 

Stamford, Conn.-based Starwood said it has a waiver from Bethesda, Md.-based Marriott enabling it to engage in discussions with the consortium; it expires March 17 at 11:59 p.m. EDT. But Starwood’s board also said yesterday it “has not changed its recommendation in support of Starwood’s merger with Marriott” after considering the non-binding proposal it received March 10. 



“Let the takeover wars begin,” St. John's University Peter J. Tobin College of Business professor Anthony Sabino tellsUSA Today’s Nathan Bomey in an email. “As is usual in these circumstances, the Starwood board will have to carefully consider both offers or, for that matter, even a third bid if one comes in. It is legally bound to obtain the ‘highest and best’ price for current Starwood shareholders.”

Then again, Marriott might deliver better results in the long run, he points out, and “it might very well be in the best interests of shareholders to … let hoteliers continue to manage a renowned set of global properties.” 

“The bottom line here… do you take what is the equivalent of $82 a share from Anbang and sort of take your quick profit and get out,” Patrick Scholes, a lodging and leisure analyst at Suntrust Robinson Humphrey, rhetorically asks CNBC’s Matthew Belvedere. “Or do you stay with Marriott, which you get about the equivalent of $70 [per share] and you continue to believe in the lodging cycle and the synergies Marriott can create here.”

Indeed, a desire to cater to the whims of the business and leisure classes is apparently not the prime motivation behind the offer.

“Analysts say the slowing Chinese economy is helping drive companies overseas, as Chinese companies seek higher-yielding assets and try to upgrade the country’s industries,” Rick Carew, Julie Steinberg and Joshua Jamerson point out in the Wall Street Journal

“Once a provincial car insurer, Anbang has emerged from obscurity to become one of China’s most aggressive overseas acquirers,” they continue. “The company has spent billions purchasing part or all of insurers in South Korea, Europe and the U.S., as well as taking stakes in listed Chinese developers, a bank, a traditional Chinese medicine maker and a wind turbine manufacturer.”

The Los Angeles Times’ James F. Peltz and Julie Makinen report that Chinese investments in hospitality alone in North America and Europe last year “totaled more than $6 billion in large part because Chinese outbound tourism has soared and Chinese firms want a piece of that action.”

A few days ago, in fact, Anbang reportedly agreed to pay Blackstone Group LP $6.5 billion in a private transaction for 16 U.S. luxury resorts and hotels including the Hotel del Coronado, an oceanfront resort near San Diego, the Ritz-Carltons Half Moon Bay and Laguna Niguel in California; the Montage resort in Laguna Beach, Calif.; Four Seasons hotels in Austin, Texas, Silicon Valley and Washington; JW Marriott Essex House in Manhattan and InterContinental hotels in Chicago and Miami, all under the Strategic Hotels banner, Bloomberg reported Saturday.

“Anbang have shown themselves as really liking trophy assets,” Sonny Kalsi, a founder and partner of GreenOak Real Estate, tells Hui-Yong Yu. “The Strategic Hotels portfolio is very complementary to the Waldorf.”

The other bidders in the consortium put together for Starwood, a source tells the New York Times’ Chad Bray and Leslie Picker, “include J. Christopher Flowers’ buyout firm, J.C. Flowers & Co., and the Primavera Capital Group, whose chairman, Fred Hu, is the former chairman of Goldman Sachs for China.”

If the deal with Marriott goes through — shareholders for both companies are slated to vote on March 28 — “it would create the world’s largest hotel company, with more than 5,500 owned or franchised hotels, for a total of 1.1 million rooms around the world,” Bray and Picker write. If it doesn’t because of Starwood, it will owe Marriott $400 million. Not bad for a few months work around the conference table.

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