Marriott International Inc. is poised to acquire Starwood Hotels & Resorts Worldwide Inc., in the process creating the biggest hotel company in the world.
The deal is valued at $12.2 billion and will see the creation of the largest hotel chain in the world that has top brands such as Ritz Carlton, Sheraton and the Autograph Collection.
On Monday, Nov. 16, Marriott disclosed that it was set to purchase Starwood for $12.2 billion. The merger has been approved unanimously by the boards of directors of both companies. The deal is anticipated to close by mid-2016.
Despite several companies - including Hyatt Hotels and Resorts - looking to snap up Starwood,Marriott succeeded in the race owing to the fact that it was an upmarket brand, as well as its size, per Starwood's Bruce Duncan.
The Marriott and Starwood merger ensures that the combined company will surpass Hilton Worldwide, which has 12 brands and 745,074 rooms vis-à-vis the two's 30 brands and 1.1 million rooms.
Nearly three-fourths of Marriott's rooms are located in the United States, whereas 50 percent of those belonging to Starwood are located outside North America.
The transaction will ensure that the combined company will account for more than 5,500 hotels worldwide. This would give Marriott a stronger presence in the Asian, European and Latin American markets, enabling it to rival startups such as Airbnb, which offers apartment-sharing alternatives.
The combined company will be led by Arne Sorenson, Marriott's CEO who believes that the hotel chain's success has been fueled by its ability to adapt to market changes.
Sorenson is also of the belief that the company can do better by being bigger and this is a move in the right direction. The size will be an advantage and will propel Marriott to invest further in both technology and marketing.
The larger scale will offer consumers a more comprehensive choice of brands. Starwood's portfolio is expected to complement that of Marriott's.
"This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace," noted Sorenson. "Today is the start of an incredible journey for our two companies."
Per the terms of the deal, investors in Starwood will gain a 0.92 Marriott Class A share and $2 for each share of Starwood common stock.
