China’s Anbang Insurance Group Co is primed to acquire Starwood Hotels & Resorts Worldwide, the operator of Sheraton and Westin hotels, for more than $13bn cash in what would be the largest ever deal by a Chinese company in the US.
The Chinese insurer – which has been on a US hotel chain buying spree – yesterday topped a previously agreed cash and stock bid from Marriott International by nearly 15%. Starwood determined the Anbang bid was superior and said it planned to scrap the deal with Marriott.
The Anbang-led consortium - which also includes private equity firms JC Flowers & Co from the US and Primavera Capital from China – has bid $78 per share in cash, or $13.16bn overall, based on shares outstanding as of February 19.
At Thursday’s close, Marriott’s bid for Starwood was worth $68.06 per share, or around $11.5bn overall.
Starwood’s shares were up 4.7% at $79.99 in midday trading, their highest level since November.
Marriott, which has until March 28 to counter Anbang’s offer, said it was considering its options.
Dan Wasiolek, a hotel industry analyst at Morningstar, said Marriott would likely counter with a higher offer.
“Marriott can increase their offer because they have the balance sheet flexibility,” he said, suggesting the larger rival hotel company could sweeten its offer by $700mn in cash.  If Anbang’s offer is successful, it would boost the company’s reputation as one of China’s top corporate acquirers, adding Starwood with its nearly 1,300 hotels in about 100 countries.
The offer follows Anbang’s $6.5bn deal struck last week for Strategic Hotels & Resorts and its $2bn purchase of New York’s iconic Waldorf Astoria hotel last year.
The US Committee on Foreign Investment in the US, an interagency panel that reviews deals to ensure they do not harm national security, will look at Starwood’s several hundred US hotels to see if any are close to critical facilities, said Stephen Heifetz, a partner with law firm Steptoe & Johnson LLP, who has experience of CFIUS reviews.
In 2012, CFIUS ordered the purchase of a wind farm in Oregon to be reversed because it was too close to a naval base.
Heifetz said this was unlikely in this case.
“I’d be surprised if there were any deal-killer for a large multi-property location,” he said, although he warned that the companies might have to make some concessions to get the deal through.
Other CFIUS experts have said previously that US regulators might be concerned about a Starwood property, the W Hotel in downtown Washington, which overlooks the US Treasury Department and the White House.
Starwood shareholders will also receive stock in Interval Leisure Group, which is buying Starwood’s vacation ownership business for about $5.67 per Starwood share.