Anbang and its partners—private-equity firms J.C. Flowers & Co. and Primavera Capital Group—said in a statement late Thursday that they decided to abandon their Starwood bid "due to various market considerations." They didn't elaborate in the statement, which confirmed an earlier report by The Wall Street Journal.
The abrupt withdrawal appears to end a topsy-turvy bidding war that highlights both the newfound muscle of Chinese companies in the high-stakes global business of mergers and acquisitions, and questions surrounding their ability to close such deals. So far this year, there have been $92 billion of foreign takeovers announced by Chinese companies, according to Dealogic, excluding the erstwhile Anbang bid for Starwood, a pace that far exceeds that of any prior year.
But U.S. regulators still must sign off on many of the deals, and there has been a swirl of political opposition in Washington. That Anbang didn't ultimately follow through after bidding aggressively for Starwood is also bound to reinforce concerns among U.S. companies that Chinese counterparts still aren't ready for the big leagues in M&A, and that could hamper more such announcements.
Anbang, an insurance company founded in 2004, has an opaque ownership structure, with multiple layers of holding companies registered across China, the Journal reported this week. Some insurance analysts have warned that the company's recent acquisition spree, which includes paying nearly $2 billion for the Waldorf Astoria hotel in Manhattan, could be straining its balance sheet, and it is unclear whether Chinese authorities approve of it. Asked for comment for that earlier story, Anbang said it is owned by more than 30 corporate investors that don't participate in the daily operation of the company.
Starwood stock fell 4.5% after hours. The stock had closed at $83.43 in New York. Some Starwood investors had welcomed the all-cash premium that Anbang offered at a time when hotel shares have been volatile and recent terrorist attacks world-wide threaten to damp overseas travel, according to some analysts. Should Anbang have succeeded, the takeover would have been the biggest Chinese purchase of a U.S. company ever.
Starwood now will stick with Marriott's most recent offer, a cash-and-stock bid currently worth $77.94 per share. At the new price, Anbang effectively forced Marriott to pay more than $1 billion extra for Starwood.
Marriott stock dropped 5% after its close of $71.18, signaling that some shareholders may have been happy for the company to lose the deal—and walk away with a breakup fee exceeding $400 million.
Marriott executives and its board, on the other hand, may be breathing a sigh of relief. Some lodging analysts have said that Marriott may have run out of firepower with its last offer. Marriott's counterbid was an unusually aggressive move for a company that historically has been conservative with its balance sheet. Chairman Bill Marriott typically has had an aversion to taking on too much debt, and the lodging company in the past has favored acquiring single-brand firms rather than pursuing splashy takeovers of rivals such as Starwood, with its 11 brands.
Marriott Chief Executive Arne Sorenson said in an interview that he heard the news about Anbang's withdrawal Thursday afternoon. "We're thrilled," he said. "And we're ready to go."
He declined to say whether Marriott had been planning to raise its offer, but indicated the company felt it could argue that even at the lower price, its bid was superior.
Marriott had said in a statement Monday that Starwood investors "should give serious consideration to the question of whether the Anbang-led consortium will be able to close the proposed transaction, with a particular focus on the certainty of the consortium's financing and the timing of any required regulatory approvals."
Starwood and Marriott say benefits from a combination of the companies include $250 million in cost savings from eliminating overlap.
Under the revised Marriott deal, Starwood shareholders would receive $21 in cash and 0.8 Marriott share for each Starwood share. Marriott and Starwood stockholders are scheduled to vote on the transaction on April 8. If approved by regulators and shareholders, the deal could close in mid-2016, the companies have said.
Last November, Marriott signed a $12.2 billion deal for Stamford, Conn.-based Starwood, which has popular brands including W Hotels, St. Regis and Westin. The combination of Starwood and Marriott—the owner of Ritz Carlton, Courtyard by Marriott and the extended-stay Residence Inn—would create the world's No. 1 hotel chain with more than one million rooms and 30 brands. Marriott's deal to buy Starwood was seen as the clearest sign yet that hospitality companies view mass scale as critical to their success at a time when the Internet is erasing old barriers to global expansion in the lodging business.
Starwood had been listening to sales offers for months, and a number of global players—including big Chinese companies—considered a bid. It later narrowed to a two-horse race between Marriott and Hyatt Hotels Corp. , with Marriott emerging as the surprise winner.
Then in March, the Anbang group made a bid to break up the deal, offering $76 a share in cash that it subsequently bumped to $78.
After Marriott raised its offer last week, Starwood announced this Monday that the Anbang group raised its proposal again, to $82.75 a share in cash. Starwood then said the offer from the Chinese insurance giant was "reasonably likely to lead to a superior proposal."
But Anbang never followed through to make the proposal binding, and it didn't tell Starwood why, according to people familiar with the matter.
Source: Wall Street Journal by Craig Karmin and Dana Mattioli
from China Travel & Tourism News http://ift.tt/1iB6EFm
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