28 October 2016
Marriott International beat Hyatt and numerous Chinese investors in a bidding war for Starwood Hotels. Photo: Reuters
Marriott International beat Hyatt and numerous Chinese investors in a bidding war for Starwood Hotels. Photo: Reuters

Marriott buys Starwood to create biggest hotel group

Marriott International Inc. is buying Starwood Hotels & Resorts Worldwide Inc. in a deal valued at US$12.2 billion to create the world’s largest hotel company.

Hyatt Hotels Corp. and numerous Chinese investors took part in a bidding war with Marriott International, according to Bloomberg.

Marriott offered US$2 a share in cash and 0.92 of its own stock for Stamford, Connecticut-based Starwood, the companies said in a statement.

The combined company will operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide.

“The deal makes sense from a strategic perspective,” Lukas Hartwich, an analyst at real estate research firm Green Street Advisors LLC, said in an e-mail.

“Scale matters a lot in the hotel business. The winners in the long run will likely be the ones with the most hotels, in the most locations, at the most price points.”

The deal is the largest takeover of a hotel company since Blackstone Group LP bought Hilton for US$26 billion in 2007.

Starwood has been exploring options including a sale since the February departure of longtime head Frits van Paasschen amid criticism he failed to increase the number of properties carrying Starwood’s brands quickly enough.

Starwood hired Lazard Ltd. to advise it in April.

In addition to competing with one another, hotel companies are also dealing with losing customers to Airbnb Inc.

At least three Chinese companies were pursuing bids for Starwood, a person with knowledge of the matter said in October.

CNBC reported on Oct. 28 that Hyatt was holding takeover talks with Starwood.

“We’re not selling for cash, we’re selling for stock,” chief executive Adam Aron said Monday on a conference call with analysts.

“This is the greatest long-term return for shareholders.”

The US hotel industry is in its sixth year of recovery from the recession and is facing supply surges in cities including New York and Seattle.

In the Americas, revenue per available room (revpar), a measure of profitability used by the lodging industry, increased 6.6 percent this year through September, according to STR Global.

Revpar rose 7.6 percent in Europe and 2.9 percent in the Middle East and Africa, while it fell 0.2 percent in the Asia-Pacific region, the lodging-research company said.

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