China's Anbang Insurance Group has made a $14-billion buyout offer for the Starwood hotel chain, setting off a takeover fight with U.S. chain Marriott International Inc.
Anbang, which bought New York's Waldorf Astoria in 2014 for close to $2 billion, has ambitions to be a player in the U.S. hotel industry.
- Marriott buys Starwood for $12.2B US, creating global hotel giant
- U.S. has security concerns about sale of Waldorf Astoria to Chinese
Recently it entered a $6.5 billion deal for Strategic Hotels & Resorts Inc., which owns The Westin St. Francis in San Francisco, JW Marriott Essex House in New York as well as five Four Seasons hotels and two Ritz Carltons.
Its $14-billion bid for Starwood outstrips the $12.2-billion offer put forward by Marriott last November, which would have made Marriott the world's largest hotel chain.
Starwood, the owner of Sheraton, Westin and St. Regis hotels, put itself on the block last year saying it had struggled to grow as fast as its rivals. It has 1,200 hotels worldwide.
With its relatively luxurious properties, it is in competition with "limited service hotels," smaller properties which don't have restaurants or banquet halls.
Anbang after luxury segment
Anbang appears to want a hefty stake in the luxury hotel segment, which is favoured by many Chinese travelers.
The offer from the Chinese group includes $76 per Starwood share and Interval Leisure Group stock currently valued at about $5.50 per Starwood share.
Starwood stock rose 7 per cent on the news.
Many Chinese companies are looking for stable investments overseas as China's growth slows and property is perceived as holding its value well.
Starwood Hotels & Resorts Worldwide Inc., based in Stamford, Conn. said Monday that it still favours the Marriott deal, but that it's looking at the latest bid.
If it accepts the Marriott deal, the chain would hold 5,500 hotels worldwide, giving it pricing power when negotiating commissions with online travel agencies such as Expedia and Priceline.
Marriott and Starwood — like other hotel chains — own very few individual hotels. Instead they manage or franchise their brands to hundreds of individual owners, often real estate development companies. Those individual hotel owners are responsible for setting nightly room rates.
It isn't uncommon for a developer to own a Marriott, Hilton, Hyatt and Sheraton in the same city. That's how Strategic, for instance, owned hotels under the Westin, JW Marriott, Ritz Carlton, Four Seasons and InterContinental brands.