Starwood Takeover Offer

Published: March 15, 2016

Starwood Takeover Offer, Around two years ago, the Anbang Insurance Group, an insurer then little known outside of China, announced that it would buy the fabled Waldorf Astoria for $1.95 billion.

Now, the Chinese insurer hopes to expand its hotel empire with an unsolicited bid to acquire Starwood Hotels & Resorts Worldwide, the operator of the hotel brands Westin, W and Sheraton, for $76 a share in cash, or $12.8 billion in total.

A consortium of investors, led by Anbang, is hoping to derail Starwood’s $10.8 billion cash-and-stock merger with Marriott International that is set to be considered by shareholders of both hotel operators this month. The other bidders in the competing consortium, according to a person with knowledge of the discussions, include J. Christopher Flowers’ buyout firm, JC. Flowers & Company, and the Primavera Capital Group, whose chairman, Fred Hu, is the former chairman of Goldman Sachs for China.

The cash offer by Anbang and its investment partners is the latest in a wave of overseas deal-making by Chinese companies. So far this year, Chinese companies have announced $81.9 billion worth of foreign deals, compared with just $10.55 billion in the same period a year ago, according to Thomson Reuters data.

Anbang’s pursuit of Starwood follows fast on the heels of reports that the Chinese company has agreed to acquire Strategic Hotels and Resorts from the Blackstone Group in a deal valued at $6.5 billion just months after Blackstone bought the company. Strategic Hotels owns the Four Seasons hotels and resorts in Silicon Valley, Washington and Jackson Hole, Wyo., the Fairmont and Intercontinental hotels in Chicago and the JW Marriott Essex House hotel in Manhattan. Anbang, led by its chairman, Wu Xiaohui, has been an aggressive deal maker in recent years. Wu is married to the granddaughter of Deng Xiaoping, China’s former top leader who oversaw the opening of the Chinese economy to capitalism and investment from foreign companies.

In addition to its deal for Waldorf Astoria, Anbang, which is based in Beijing, has also bought an American insurer, Fidelity & Guaranty Life Insurance, for nearly $1.6 billion, and a controlling stake in a South Korean life insurer. Last year, it also unsuccessfully offered to buy a Portuguese lender. Anbang got its start as a car insurer supported in part by the SAIC Motor Corporation, China’s largest automaker. A decade ago, it was a small operator compared with China’s big state-owned insurance companies.

But the company broadened its operations to sell investment products and other services and has increasingly made aggressive bets. It was helped by the Chinese government’s move in recent years to give Chinese insurers greater freedom to invest their money, making them major players in real estate and other areas in China.

The consortium’s cash offer, which was made on March 10 and announced publicly by Starwood on Monday, represents a significant premium to Marriott’s deal, which has been affected by a decline in the hotel operator’s stock price since it was announced in November.

Starwood said on Monday that its board had not changed its recommendation in support of the Marriott deal, but that it would carefully consider the outcome of its discussions with the consortium led by Anbang to determine the course of action that is in the “best interest of Starwood and its stockholders.”

Starwood said that it had received a waiver from Marriott to allow it to engage in discussions and due diligence with the consortium. The waiver expires on Thursday.

Marriott described the rival takeover approach to Starwood as “highly conditional and nonbinding.”


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