Marriott International Inc. yesterday announced an agreement to buy Renaissance Hotel Group N. V. for $1 billion in cash and assumed debt, thwarting a competitive bid from Doubletree Corp. by $120 million.
The deal between the Bethesda-based hotel operator and Renaissance would add 150 hotels to Marriott's portfolio, greatly increasing its international presence and cementing its position as the world's largest lodging chain.
It would also give Marriott one of Baltimore's premier hotels, the 622-room Renaissance on East Pratt Street in the Inner Harbor.
If completed, the acquisition would be the largest in Marriott's 70-year history, eclipsing its $650 million purchase of senior housing operator Forum Group Inc. last February and a $200 million investment for a 49 percent interest in the luxury Ritz-Carlton hotel chain in 1995.
Combined, Marriott and Renaissance operate or franchise more than 1,300 hotels worldwide, containing 273,000 rooms.
Adding Renaissance, a Hong Kong-based chain that operates under the Renaissance, New World and Ramada International brand names, will also help Marriott meet a 1995 goal to boost its portfolio by 100,000 rooms by the end of the decade. The proposed merger would add more than 46,000 rooms.
"With the addition of these three outstanding brands to our portfolio, we immediately will reach customers in 40 new markets, including Russia, China, Japan, India, Italy and Turkey, and more than double our presence outside the United States," said J. W. Marriott Jr., chairman and chief executive of Marriott International.
Marriott's acquisition comes at a time of growing consolidation in the hotel industry. Just last month Hilton Hotels Corp. made a hostile $10.5 billion bid for ITT Corp. and its Sheraton hotels, casinos, Madison Square Garden arena and New York Knicks and New York Rangers sports teams.
Marriott expects the acquisition to be final by the end of June. The deal is subject to completion of a $30-a-share cash offer for Renaissance's outstanding shares, which Marriott expects to begin within five business days.
New World Development Co. Ltd., a $6 billion Asian developer and Renaissance's largest shareholder with a 54 percent stake, has already approved the transaction.
"We share similar corporate cultures and complement each other geographically and operationally," said Henry K. S. Cheng, Renaissance's chairman and managing director of New World Development. Cheng will join Marriott's board of directors.
"At New World, we are confident that our alliance with Marriott will enhance substantially the value of our current hotel holdings, and provide even more exciting hotel development opportunities going forward," Cheng added.
In reaching the agreement with Marriott, Renaissance backed out of a 2-month-old, $850 million deal with Doubletree Corp., a Phoenix-based hotel chain. In breaking that transaction, Marriott and Renaissance will have to pay Doubletree $15 million. Doubletree said yesterday that it would not increase its bid.
"Buying Renaissance is an excellent strategic acquisition for Marriott," said Camillle E. Humphries, an Alex. Brown & Sons Inc. lodging industry analyst. "They're similar in that they're both operators and franchisers, and neither owns significant real estate.
"Moreover, they're complementary in that they operate in different markets," Humphries added. "Marriott is more of a domestic operator, with an international presence of only about 10 percent. With Renaissance, they fast-forward their international presence, which they have been working at for some time."
In downtown Baltimore, Marriott would face the thorny issue of dealing with both a Renaissance hotel and a Marriott franchise. Under its agreement with the owners of the Marriott Inner Harbor Hotel at Pratt and Eutaw streets near the Camden Yards stadium, the company is prohibited from flying the Marriott flag on any other hotel in the Baltimore area.
It is likely, though, given the upscale Renaissance's premier downtown location and connection to the Gallery at Harborplace, that Marriott would try to put its name on the property.
Marriott also operates hotels under Fairfield, Residence Inn, TownePlace Suites and Marriott Executive Residence signs.
J. W. Marriott, in a conference call with reporters, said it was "too early to tell" what would happen in situations where Marriott and Renaissance hotels overlapped.
Marriott anticipates Renaissance will contribute between $75 million and $85 million in earnings before interest, taxes and noncash charges in the first 12 months after completion of the transaction.
The company also said it will save between $15 million and $20 million a year by integrating Renaissance into Marriott's marketing, reservation and administrative systems.
Last year, Marriott reported net income of $306 million from sales of $10.2 billion, while in its 1996 fiscal year that ended in June, Renaissance generated earnings of $31 million on revenues of $128 million.
Pub Date: 2/19/97