Anbang Firms Up Its Offer for Starwood

March 20, 2016 Updated: March 26, 2016

Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) announced that it received a revised binding offer from the consortium led by Anbang Insurance Group. The offer constitutes a “superior proposal” and Starwood’s board plans to call off the Marriott merger agreement, according to the company’s press release.

The consortium revised its bid to $78 per share in cash, an increase from the $76 per share proposal made on March 10, 2016. This tops Marriott’s earlier bid, which is currently valued at $65.33 (in cash and stock) and has a higher potential to derail the rival’s merger plan.

Anbang’s new offer raised the value of Starwood by nearly $340 million, bringing it to $13.2 billion.

Starwood, the owner of St. Regis, W, Westin, and Sheraton brands, will have to pay Marriott $400 million to break up the merger arrangement. Marriott International, Inc. (NASDAQ: MAR) has until March 28 to make another offer.

Both Marriott and Starwood announced they had agreed to merge in a cash and stock deal that would value Starwood at $12.2 billion last November. The merger, if it still goes through, would create the world’s largest hotel company.

On March 18, Marriott reiterated its interest to acquire Starwood and stated: “Marriott continues to believe that a combination of Marriott and Starwood is the best course for both companies and offers the best value to Starwood shareholders. Marriott is in the process of reviewing the Anbang consortium’s proposal and is carefully considering its alternatives.”

After the news last Friday, shares of Starwood rose 5.1 percent, to $80.32. And shares of Marriott rose 2.3 percent to $73.43.

(Google Finance)
(Google Finance)

Other consortium members acting together with Anbang in the Starwood deal are the two private equity firms J.C. Flowers & Co. and Primavera Capital Limited.

Founded in 2004, Anbang made a surprising move in the United States last year by acquiring New York City’s Waldorf Astoria Hotel. The company has aggressively taken billions out of China and invested them in insurance companies in the United States, Belgium, the Netherlands, and South Korea. 

Last week, it offered $6.5 billion to buy Strategic Hotels & Resorts Inc., which owns several high-end properties including the JW Marriott Essex House in New York and Hotel Del Coronado in San Diego.

The Waldorf Astoria Hotel in Midtown East in Manhattan on Oct. 6, 2014. (AP Photo/Mark Lennihan)
The Waldorf Astoria Hotel in Midtown East in Manhattan on Oct. 6, 2014. (AP Photo/Mark Lennihan)

Recent Deals May Attract Scrutiny

However, given Anbang’s ties to the Chinese Communist Party, transactions like the sale of the Waldorf  present security issues.

There is plenty of reason for controversy. The chairman of Anbang, Wu Xiaohui, is the grandson-in-law of the former leader of the Chinese Communist Party, Deng Xiaoping.

One of Anbang’s consultants is Chen Xiaolu, founder of the Red Guard Police Corps during the time of Mao Zedong’s Cultural Revolution, who had previously admitted he was part of the torture and persecution of teachers during the Cultural Revolution. His father was one of the communist regime’s founding generals.

Anbang’s $1.95 billion acquisition of the iconic Waldorf Astoria Hotel last year, attracted scrutiny from the Committee on Foreign Investment in the United States (CFIUS), which reviews deals over possible national security concerns, but was eventually approved. According to experts, CFIUS will also take a look at Anbang’s latest activities. 

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