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Marriott Back in the Picture as Starwood Accepts its Higher Offer

Starwood Agrees to Revised $13.6 Billion Bid
March 21, 2016
Marriott International is back in the picture for the acquisition of Starwood Hotels & Resorts Worldwide after upping its offer following a surprise bid last Friday from an investment group led by China’s Anbang Insurance Group.

Bethesda, MD-based Marriott came back to Starwood Hotels with a revised offer valued at $13.6 billion, topping Anbang’s offer by $400 million.

Starwood's board of directors determined that Marriott's revised offer now constitutes a superior proposal compared to the Anbang consortium's offer.

In a joint statement, Starwood and Marriott said the revised Marriott offer is expected to provide "superior value for Starwood's shareholders, the ability to close quickly, and provides value creation potential that will allow both sets of shareholders to benefit from improved financial performance."

Marriott and Starwood will hold special stockholder meetings April 8, 2016, to allow shareholders to vote on the amended merger agreement. If approved, and no additional competing offers come in, the transaction is expected to close in mid-2016.

Marriott said it is confident it can achieve $250 million in annual cost savings within two years after closing, $200 million more in cost savings that the amount estimated in November 2015 when Marriott originally made its offer.

Marriott and Starwood have already obtained required regulatory consents to complete the transaction, including clearing pre-merger antitrust reviews in the United States and Canada.

If finalized, the proposed merger will create the world's largest hotel company owning about 5,700 hotel properties with more than 1.1 million rooms among 30 brands in more than 100 countries.

"After five months of extensive due diligence and joint integration planning with Starwood, including a careful analysis of the brand architecture and future development prospects, we are even more excited about the power of the combined companies and the upside growth opportunities,” said Arne Sorenson, president and CEO of Marriott International. “We are also more confident of achieving our updated target of $250 million of cost synergies. With a higher cash component in the purchase price, we have improved the transaction's financial structure as well.”

Sorenson added that the company expected to accelerate the growth of Starwood's brands by leveraging Marriott's hotel development organization and extensive owner and franchisee relationships.

Current Starwood shareholders will own about 34% of Marriott’s stock under the revised proposal.

Marriott said it remains committed to maintaining an investment grade credit rating after the merger. While Marriott anticipates its leverage will be modestly higher than targeted levels when the transaction closes, it expects to reach targeted leverage of 3x to 3.25x adjusted debt to adjusted EBITDAR by year-end 2016.

The company expects comparable systemwide RevPAR on a constant dollar basis in North America, outside North America and worldwide will increase 2% to 4% in the first quarter of 2016 and 3% to 5% for full year 2016.

Those expectations do not include the impact of the planned Starwood transaction.

“Even excluding the Starwood acquisition, we expect our gross room additions will grow our system by 8% in 2016, outpacing our 7% growth last year,” Sorenson said.



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