China’s Anbang Insurance Group Co. Ltd. has challenged Marriott International Inc.’s merger with US hotel operator Starwood Hotels and Resorts Worldwide Inc. with a US$12.8 billion cash offer, Reuters reports.
The non-binding bid, unveiled Monday, just days after Anbang agreed to acquire Strategic Hotels & Resorts Inc. from buyout firm Blackstone Group LP for US$6.5 billion, would represent by far the biggest Chinese investment in US property assets.
Chinese insurers are rushing to acquire high-yielding assets as they struggle to keep up with the policy liabilities of the country’s aging population.
US assets are also seen as a good hedge against any future weakness in the renminbi.
The head of China’s insurance regulator, Xiang Junbo, wrote in January in a magazine published by the country’s central bank that Chinese insurers should venture overseas for investments.
These investments, however, are not without hurdles.
Anbang’s US$2 billion acquisition of the iconic Waldorf Astoria Hotel in New York, which was completed last year, attracted scrutiny from the Committee on Foreign Investment in the United States (CFIUS), which reviews deals over possible national security concerns.
US President Barack Obama used to stay at that hotel when visiting United Nations headquarters in New York.
While there is no indication that a potential acquisition of Starwood by a consortium led by Anbang would raise concerns about potential espionage, experts said it was possible such a deal would also trigger a CFIUS review.
One Starwood property for example, the W Hotel in downtown Washington, overlooks the US Treasury. However, CFIUS issues with individual hotels could be remedied through divestments or other measures.
Marriott said it remains committed to its cash-and-stock deal with Starwood, which would create the world’s largest hotel chain, with top brands including Sheraton and Ritz-Carlton.
Starwood said it received a waiver from Marriott that allows it to engage in discussions with Anbang’s consortium. The waiver expires on Friday.
Marriott’s deal, inked in November, currently values Starwood at US$67.22 per share, below Anbang’s US$76 per share offer.
“Anbang’s non-binding offer places Starwood shareholders in the difficult position of choosing between Marriott’s bird-in-a-hand firm commitment and Anbang’s two-in-the-bush offer,” Nomura Securities analyst Harry Curtis wrote in a note to clients.
Marriott may slightly improve the terms of its offer and emerge as the winning bidder, Curtis said.
The Anbang-led consortium includes private equity firms J.C. Flowers & Co and Primavera Capital Group, a source close to the parties said.
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