Anbang Withdraws Deal for Starwood

It looks like Starwood will be merging with Marriott hotels after a consortium led by Anbang Insurance of China pulled out of the deal on Thursday evening.

Anbang Insurance Group together with private equity partners J.C. Flowers & Co. and Primavera Capital Limited, (collectively, “the Consortium” ), announced that the Consortium has determined not to proceed with its proposal to acquire Starwood Hotels & Resorts Worldwide.

The Consortium issued the following statement:

“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.  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.”

The Consortium led by Anbang bid twice to wrestle Starwood from an acquisition by Marriott International with its latest offer at $82.75 per share in cash or about $14 billion. However, questions arose in the media whether Anbang had enough money to make the deal and just who in China was behind Anbang.

Starwood’s Board of Directors said in a statement that it continues to unanimously support the existing merger with Marriott International, which will create the largest hospitality company in the world.

Bruce Duncan, Chairman of Starwood’s Board, stated, “Throughout this process, we have been focused on maximizing stockholder value now and in the future. Our Board is confident this transaction offers superior value for Starwood’s stockholders, can close quickly, and provides value-creation potential that will enable both sets of stockholders to benefit from future financial performance. We continue to be very excited about the combination of our two companies and are committed to completing this deal in an expeditious manner. We are confident Starwood stockholders will support a merger that will create the world’s best and biggest hotel company and which offers significant long-term upside for not only our stockholders, but also our company and associates.”

Thomas B. Mangas, Chief Executive Officer, continued, “We are excited to be part of the world’s largest hotel company with an unparalleled platform for global growth. The existing merger agreement provides substantial value to our stockholders through significant upfront cash consideration and long-term upside potential from projected shared synergies, including $250 million in cost synergies and significant revenue synergies, as well as ownership in one of the world’s most respected companies.”

Under the terms of the amended merger agreement, as announced on March 21, 2016, Starwood shareholders will receive $21.00 in cash and 0.80 shares of Marriott Class A common stock for each share of Starwood common stock. Excluding Starwood’s timeshare business, the transaction values Starwood at approximately$13.3 billion ($77.94 per share), consisting of $9.7 billion of Marriott stock, based on the closing price of $71.18on March 31, 2016, and $3.6 billion of cash, based on approximately 170 million outstanding Starwood shares. Starwood shareholders will own approximately 34 percent of the combined company’s common stock after completion of the merger, based on current shares outstanding.