Anbang ups bid for Starwood, making Marriott merger less likely

Staff and wire service reports

Bethesda-based Marriott International Inc. may lose its bid to become the world's biggest hotel operator after a Chinese company increased its offer for Starwood Hotels & Resorts Worldwide Inc. to more than $14 billion.

In November, Marriott said it wanted to buy Starwood, offering $12.2 billion in a cash and stock deal that valued the company at $72.08 a share. It upped its bid to $13.6 billion — $79.53 per share — after China's Anbang Insurance Group Co. started pursuing Starwood.

Anbang's most recent offer, disclosed Monday, would give stockholders $82.75 per share, as well as other benefits.

Starwood properties include Sheraton hotels and luxury properties such as the St. Regis New York. The company's board said Monday that the offer from the Anbang group is "reasonably likely" to be superior to the one made last week by Marriott.

Marriott has said it remains committed to a merger, but some industry analysts believe this might be a fight Marriott can't win.

That has been the view of Canaccord Genuity analyst Ryan Meliker, who told clients in a research note, "We don't think [Marriott] can go higher, and we would question it if they did."

Starwood said Monday that its board has not changed its recommendation in support of a deal with Marriott, though it is reviewing Anbang's latest offer.

Marriott stood behind its last bid "as the best course" for Starwood in a letter Monday. CEO Arne Sorenson has said the merger would create a global powerhouse with a loyalty program unmatched by any other hotel and generate about $250 million in annual cost savings for Marriott — $50 million more than the firm initially estimated.

Together, the two companies and their brands would have more than three dozen hotels around the Baltimore region. Marriott hotels in downtown Baltimore include the Renaissance Baltimore Harborplace Hotel, the Baltimore Marriott Waterfront and the Fairfield Inn & Suites on President Street. Starwood hotels include the Sheraton Inner Harbor Hotel in Baltimore and the Westin Annapolis.

Marriott also advised Starwood shareholders to scrutinize Anbang's financing and consider the "timing of any required regulatory approvals."

That comment appeared to be a veiled reference to the potential hurdles that a Chinese company might have to clear to buy Starwood, which is based in Stamford, Conn.

Anbang dealt with similar concerns two years ago when it acquired the Waldorf Astoria in New York for nearly $2 billion. While it tries to acquire Starwood, Anbang is also trying to purchase Strategic Hotels & Resorts in a proposed $6.5 billion deal.

Although Anbang's purchase of the Waldorf Astoria was cleared by the U.S. Treasury's Committee on Foreign Investment, concern about the hotel becoming an outpost for Chinese espionage persists. Last year, President Barack Obama, his top aides and staff, and a sizable U.S. diplomatic contingent lodged elsewhere during the United Nations General Assembly.

That decision ended a decades-long tradition of presidents and other top U.S. diplomatic officials staying at the Waldorf Astoria when in New York. The government still leases a residence for the U.S. ambassador to the U.N. in the Waldorf.

Anbang and other Chinese companies have been trying to diversify their investment portfolios by moving into more stable areas, such as U.S. real estate, amid signs of slowing economic growth at home.

Foreign purchases of hotels and other real estate typically don't trigger national security concerns in the U.S. unless the locations are near key military bases or other sensitive government sites, said Anne Salladin, a special counsel specializing in national security reviews for Stroock & Stroock & Lavan in Washington.

Starwood's portfolio includes a W Hotel that overlooks the U.S. Treasury Department in Washington.

Caixin, a financial magazine in China, also has raised the possibility of Anbang's Starwood bid being derailed by its own government. That's because Anbang's plans to buy Starwood and Strategic Hotels could violate restrictions that limit Chinese insurance companies from having more than 15 percent of their assets in foreign investments.

Whoever gains control of Starwood will likely be entering Cuba as well. This month, Starwood became the first U.S. hotel operator to gain access to the country.

Starwood's stock rose $1.62 to close Monday at $83.75, while Marriott's shares gained $2.70, or nearly 4 percent, to finish at $71.34.

The Associated Press and Baltimore Sun reporter Natalie Sherman contributed to this article.

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