Anbang Walks Away from Starwood Acquisition

The Wall Street Journal reports that Chinese insurance firm Anbang is walking away from its efforts to acquire Starwood Hotels and Resorts. Starwood now plans to revert to Marriott’s most recent offer — which it raised after facing competition from Anbang and was valued at $13.6 billion at the time.

Because Marriott’s offer was mostly in the form of company stock, the value fluctuates with Marriott’s stock price, which fell after raising its bid. Still, Anbang’s intervention makes the new deal more generous than what Marriott initially offered last month.

The new deal from Marriott includes $21 in cash and 0.8 shares of Marriott stock for each share of Starwood. Based on closing prices today, Marriott’s deal values Starwood at only $13.2 billion. However, shares of Marriott and Starwood have both plummeted about 4-5% in after hours trading. My guess is Starwood shareholders realize the deal isn’t going to get any richer, and Marriott shareholders are reluctant to pay so much for Starwood.

We still don’t know if it’s good news or bad for members of Starwood Preferred Guest. My money is on bad. As much as Marriott tries to sweet talk customers and investors, saying it hopes to avoid destroying value and wants to learn from Starwood’s ability to court high-income travelers, the fact is that some form of Marriott Rewards will survive in the end. It think it’s very unlikely that the new program will be as good as Starwood Preferred Guest.