Star­wood board weighs op­tions in An­bang of­fer

China Daily (Canada) - - ACROSS AMERICAS - By PAUL WELITZKIN in New York paulwelitzkin@chi­nadai­lyusa.com

The next 48 hours will be very in­ter­est­ing for board mem­bers of Star­wood Ho­tels & Re­sorts World­wide Inc as they con­sider an un­so­licited of­fer of about $12.8 bil­lion from a con­sor­tium led by China’s An­bang In­sur­ance Co.

Star­wood, based in Stam­ford, Con­necti­cut, has a waiver from Mar­riott In­ter­na­tional Inc that en­ables it to en­gage in talks with the An­bang group un­til 11:59 pm EDT on Thurs­day. Star­wood’s board said “it has not changed its rec­om­men­da­tion” in sup­port­ing the $12.2 bil­lion of­fer from Mar­riott.

“They don’t have to make a de­ci­sion — and ev­ery­thing is ne­go­tiable,” C. Pa­trick Sc­holes, an an­a­lyst with SunTrust Robin­son Humphrey Inc, told China Daily when asked if the board had to de­cide by the Thurs­day dead­line.

“Star­wood can choose to not do any­thing. How­ever, they can­not con­tinue to keep con­vers­ing with An­bang once the waiver pe­riod ends.”

The An­bang group of­fer is $76 a share in cash for Star­wood, the owner of the Westin and Sher­a­ton brands. An­bang’s part­ners in­clude Pri­mav­era Cap­i­tal Group, a China-based pri­vate-equity con­cern, and J.C. Flow­ers & Co.

Last year, Mar­riott agreed to pay cash and stock that cur­rently val­ues Star­wood at about $67.22 a share, ac­cord­ing to Reuters.

Sc­holes said that there is a breakup fee of $400 mil­lion that Star­wood would have to pay Mar­riott of­fer.

The Star­wood of­fer came a few days af­ter An­bang also re­port­edly agreed to buy a lux­ury-ho­tel port­fo­lio from Black­stone Group LP’s Strate­gic Ho­tels & Re­sorts Inc for about $6.5 bil­lion.

An­bang, a Chi­nese in­surer founded in 2014, ac­quired the Wal­dorf-As­to­ria New York ho­tel for $1.95 bil­lion in 2014. An­bang has not com­mented pub­licly on the Star­wood or Black­stone deals.

if

it ac­cepts an­other

The An­bang deal could face re­view by the Com­mit­tee on For­eign In­vest­ment in the United States (CFIUS), an in­ter­a­gency group that has broad au­thor­ity to re­view trans­ac­tions in which a for­eign com­pany ac­quires con­trol over a US busi­ness.

John O’Neill, di­rec­tor of the Cen­ter for Hos­pi­tal­ity Real Es­tate Strat­egy at Penn State Univer­sity, said that An­bang wants its port­fo­lio to be heav­ily weighted with US-based ho­tel com­pa­nies.

“(An­bang) ap­par­ently has the where­withal to do so, but it raises the ques­tion of whether they’re uni­lat­er­ally do­ing what will pro­vide them with a sat­is­fac­tory risk pro­file, par­tic­u­larly con­sid­er­ing the rel­a­tively high share price An­bang is of­fer­ing for Star­wood,” O’Neill said.

“A trans­ac­tion more akin to Jin Jiang and Thayer’s mu­tual ac­qui­si­tion of In­ter­state would be less risky for An­bang,” he said, re­fer­ring to the 2009 deal in­volv­ing the Thayer Lodg­ing Group and Shang­hai Jin Jiang In­ter­na­tional Ho­tels.

They paid about $307 mil­lion to ac­quire US-based In­ter­state Ho­tels & Re­sorts Inc, which man­aged more than 200 prop­er­ties at the time.

“An­bang would ben­e­fit from a US as­set man­ager to pro­vide them with (the) req­ui­site in­tel­li­gence re­gard­ing the brands, prop­er­ties and sub­mar­kets, as well as to mon­i­tor the on­go­ing per­for­mance of this very pricey port­fo­lio,” O’Neill said.

C. Pa­trick Sc­holes, an­a­lyst with Sun Trust Robin­son Humphrey Inc

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