Chinese Insurer Anbang Walks Away From Starwood Deal

March 31, 2016 Updated: April 2, 2016

Anbang pulled its $14 billion takeover bid for Starwood Hotels on March 31. The surprising move will put an end to the recently escalated bidding war between Chinese insurer Anbang and the U.S. hotelier Marriott.

“The Consortium has informed Starwood that, as a result of market considerations, it has withdrawn its non-binding proposal to acquire all of the outstanding shares of common stock of Starwood for $82.75 per share in cash and does not intend to make another proposal,” said Starwood in a statement

A consortium led by Anbang made several attempts to break up Marriott’s merger plan by making a series of higher offers for Starwood. 

In its latest shot on March 28, Anbang raised the bid to $82.75 per share in cash. This valued Starwood at $14 billion against Marriott’s $13.6 billion proposal.

Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) shares fell as much as 4.5 percent to $79.65 in extended trading. Marriott International, Inc.(NASDAQ: MAR) shares also dropped by 5.02 percent.

Both Mariott and Starwood signed an amended merger agreement after Mariott sweetened its bid for Starwood on March 21. Starwood shareholders are scheduled to vote on Marriott’s cash-and-stock bid on April 8.

Starwood has about 10 brands including St. Regis, W, Westin, and Sheraton. If the merger goes through, it will create the world’s largest hotel company. Marriott is confident it can achieve $250 million in annual cost synergies within two years after closing the Starwood deal.

Other consortium members acting together with Anbang in the Starwood deal were 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 iconic 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. 

It also 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.

Anbang has close ties to the Chinese Communist Party. The chairman of Anbang, Wu Xiaohui, is the grandson-in-law of the former leader of the Chinese Communist Party, Deng Xiaoping. 

The company also has a complicated ownership structure with multiple layers of holding companies registered all around the country, according to a Wall Street Journal reportSeveral Wall Street banks could not get internal clearance to pursue work with Anbang in the past, partly because of its opaque ownership structure.

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