Cars drive past a Marriott International hotel in San Francisco. Marriott currently has three-quarters of its rooms in the US.

Cash-and-stock deal to create world’s largest hotel chain; combined company to have 1.1mn rooms worldwide; Marriott CEO to head combined company

Reuters
Berlin


Marriott International will buy Starwood Hotels & Resorts Worldwide for $12.2bn to create the world’s largest hotel chain with top brands including Sheraton, Ritz-Carlton and the Autograph Collection.  The combined company will own or franchise more than 5,500 hotels with 1.1mn rooms worldwide and give Marriott greater presence in markets such as Europe, Latin America and Asia including India and China.
Marriott currently has three-quarters of its rooms in the US. Starwood, which also owns St Regis and Aloft hotel brands, gets nearly two-thirds of its revenue from outside the country.
Starwood shares fell 5.2% to $71.07 in premarket trading yesterday, below the offer price of $72.08, indicating investors were unhappy with the offer being at a 4% discount to the stock’s Friday close.
Marriott shares fell 1.3% to $71.65.
“We have been in the business for a long time but Starwood is more global than Marriott is,” Marriott chief executive Arne Sorenson, who will lead the combined company, told CNBC. “It’s a good thing that we will have more sources (of growth) from around the world.”
Starwood had essentially put itself up for sale in April, when it said it was considering strategic alternatives, taking about 14% off its stock up to Friday’s close.
The company, which had a market value of $12.67bn as of Friday, had reached out to InterContinental Hotels Group, Wyndham Worldwide Corp and sovereign wealth funds for a possible deal since July, sources had told Reuters.
Starwood’s shareholders will get 0.92 Marriott Class A share and $2 in cash for each share held. They will also get about $7.80 per share from the spinoff of Starwood’s timeshare business and subsequent merger with Interval Leisure Group, announced in February. Marriott said it expected one-time transaction cost of $100mn-$150mn related to the acquisition, which was expected to add to earnings from the second year after it closes.
After the transaction closes, the company is expected to add three Starwood members to its board, which will expand to 14 members.
The deal is expected to close in mid-2016, the companies said.
Lazard and Citigroup advised Starwood on the deal and Deutsche Bank Securities advised Marriott.