July 1, 2016

Marriott International-Starwood merger finally on track for success

Marriott and Starwood are gaining regulatory approval for their deal.

It's been a long, uncertain few months for the potential Marriott International and Starwood Hotels and Resorts merger. Last November, Marriott and Starwood announced that they would be merging to create the largest hotel chain in the world. The deal – then valued at around $12.2 billion – would combine Starwood's leading lifestyle, luxury brands with Marriott's significant international reach. The newly combined company would operate 5,500 hotels around the globe with 1.1 million rooms.

What problems has the deal encountered?
While both companies' boards of directors unanimously approved the deal in November, China's Anbang Insurance Group, a Beijing-based firm, topped Marriott's offer with a higher price of $13.2 billion in March 2016, according to The Real Deal. In response, Marriott raised its offer to $13.6 billion. Finally, Anbang countered with a $13.9 billion offer, according to USA Today.

In response to the initial terms of the Anbang deal, The Wall Street Journal reported that Marriott told Starwood investors they "should give serious consideration" as to whether or not the Chinese firm would be able to close the deal. What ended this bidding war, however, was Anbang itself. Due to financing difficulties, regulatory approval and unusual negotiating tactics, Anbang soon rescinded its offer, leaving Marriott as the sole bidder for Starwood. According to various insider reports, Anbang failed to provide a specific written offer, nor did it outline its financial plan.

"We were attracted to the opportunity presented by Starwood because of its high-quality, leading global hotel brands, which met many of our acquisition criteria, including the ability to generate consistent, long-term returns over time," the Anbang-led consortium said in a prepared statement. "However, due to various market considerations, the Consortium has determined not to proceed further. We thank the Starwood Board, management team and its advisors for their efforts and support throughout this process."[according to? i only see this occur in one source]

What's next for the two hotel chains?
Soon after the Anbang proposal failed, Marriott and Starwood held separate stockholder meetings, where both companies approved the proposals regarding the continued Marriott acquisition. Over 97 percent of present Marriott shares voted in favor, while 95 percent of those at Starwood did the same. While both companies were in favor for the deal, as their union would create the largest hotel chain in the world, they still face regulatory approval.

On June 27, Reuters reported that EU regulators granted the deal antitrust approval. In a prepared statement, EU Competition Commissioner Margrethe Vestager remarked on the deal, saying, "This is an important merger for the hotel industry and its customers. Our investigation confirmed that the hotel sector will remain competitive for customers in Europe following the merger."

U.S. and Canadian regulators have already approved the terms of the deal as well, according to Reuters.