Starwood Hotels is again open for bidding, as China's Anbang withdraws its $14 billion deal.
The abrupt withdrawal of China's Anbang Insurance Group Co. seems to end the three-week bidding war for the takeover of Starwood Hotels and Resorts Worldwide, Inc.
Just last weekend, Anbang made a non-binding cash offer of $82.75 per share after a multitude of bids over a month. Its $14 billion offer only came about four months after Marriott International Inc. completed a merger deal with Starwood, making the sudden withdrawal a surprise.
According to the company who was working with Primavera Capital Group and J.C. Flowers and Co, "various market considerations" prompted them to discontinue the talks.
"My guess is it boils down to some regulatory risk," said James Corl, managing director of real estate private equity company Siguler Guff & Co.
Experts say that the latest offer is more than what Anbang can offer after Marriott publicly addressed the financial capacity of the former.
Primavera founder Fred Hu shared that the withdrawal is not a surprise for a company like Anbang. He explains that a disciplined buyer like Anbang does not take interest in protracted bidding wars.
"While attracted to Starwood's high-end global hotel portfolio, at the end of the day Anbang is a disciplined buyer," Hu said.
With the falling out, Sheraton's operator is expected to reconsider a previous offer from Marriott International Inc.
On April 8, shareholders of Starwood are expected to vote on Marriot's $13.2 billion cash-and-stock offer or $77.94 per share, which excludes Starwood's timeshare spinoff.
The sudden withdrawal caused Starwood and Marriott shares to fall by 4.1 percent to $80.05 and 4.9 percent to $67.69, respectively.
Starwood Chairman Bruce Duncan said that merger with Marriott would offer the best value for their company. Should Marriott acquire Starwood, it would become the world's largest hotel company by adding Sheraton, Westin, and W to its existing chain of hotels, which include Marriott, Ritz-Carlton, Protea, Bulgari, and Moxy.
They are also looking at being more competitive with other hotel chains like Hilton Worldwide Holdings Inc.
"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," Duncan said.
Although Anbang backed out of the talks, Hu said that Anbang is not out of the race. The Chinese company has been continually expanding their business into U.S. hotels with its $1.95 billion takeover of New York's Waldorf Astoria last year. Anbang also acquired 16 luxury hotels and resorts in a $6.5 billion deal with Blackstone Group.
Hu is confident that under Chairman Wu's leadership. Anbang is still a company to watch out for in cross-border deals.
"Though Anbang has decided to withdraw from the Starwood situation, don't count it out," Hu wrote in his email.
