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Consortium Bid Derails Starwood-Marriott Merger

Starwood Hotels & Resorts Worldwide, Inc. today notified Marriott International, Inc. that the bid it received last week from a consortium headed by China’s Anbang Insurance Group has been determined to be a “Superior Proposal” to the existing Marriott-Starwood merger agreement.

Starwood has further informed Marriott that it intends to terminate the merger agreement with Marriott unless Marriott and Starwood agree on revisions to their merger agreement that Starwood’s board of directors determines to be superior to the Anbang proposal.

Under the terms of Marriott’s merger agreement with Starwood, Marriott has the right to propose revised terms and Starwood must negotiate in good faith with Marriott to discuss any such proposed revised terms, for a period of five business days ending on Monday, March 28 at 11:59 p.m. ET.  If Starwood terminates the Marriott merger agreement in order to accept the consortium proposal, Starwood must pay Marriott a termination fee of $400 million USD in cash.

Currently, when all the numbers are crunched and considerations made, the Consortium bid comes out  $12.67 USD per share ahead of the Marriott proposal.

The Consortium Bid

The “Consortium” is comprised of Anbang, J.C. Flowers & Co. and Primavera Capital Limited. It made its original bid on March 10th. The revised binding and fully-financed proposal that Starwood is considering would have the Consortium acquire all of the outstanding shares of common stock of Starwood for $78.00 per share in cash, an increase from the $76.00 per share proposed in the March 10 bid.

Pursuant to separate agreements entered into by Starwood, Starwood stockholders would also receive consideration in the form of Interval Leisure Group (ILG) common stock from the previously announced spin-off of its vacation ownership business, Vistana Signature Experiences, and subsequent merger with ILG, currently valued at approximately $5.67 per Starwood share, based on the 20-day VWAP (volume weighted average price) of ILG common stock ending March 17, 2016.

On this basis, the consortium proposal and and the ILG transaction have a current value of $83.67 per share. 

In its press release, Starwood says that its Board of Directors believe that the binding and fully-financed proposal from the Consortium provides a high degree of closing certainty.

The Marriott Proposal

Under the terms of the merger agreement with Marriott, Starwood stockholders would receive 0.92 shares of Marriott International, Inc. Class A common stock and $2.00 in cash for each share of Starwood stock. Based on Marriott’s 20-day VWAP ending March 17, 2016, the merger transaction has a current value of $65.33 per Starwood share, including the $2,00 cash per share consideration. Starwood stockholders will separately receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with ILG of approximately $5.67 per Starwood share, based on the 20-day VWAP of ILG common stock ending March 17, 2016.

On that basis, the merger with Marriott and the ILG transaction have a current value of $71.00 per share.

In its press release, Marriott states that it continues to believe that a combination of Marriott and Starwood is the best course for both companies and offers the best value to Starwood shareholders.  Marriott is in the process of reviewing the Anbang consortium’s proposal and is carefully considering its alternatives.

Both Starwood and Marriott are considering postponing their respective Special Meeting of Stockholders which are currently scheduled for March 28, 2016.

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