China’s Anbang Insurance Group Co. said it has abandoned its $14 billion bid for Starwood Hotels & Resorts Worldwide Inc., paving the way for Marriott International Inc. to buy the Sheraton and Westin hotels operator.
The surprise withdrawal marks an anticlimactic end to a bidding war that had pitted Marriott’s ambitions to create the world’s largest lodging company, with about 5,700 hotels, against Anbang’s drive to create a vast portfolio of US real estate assets.
It also represents a blow to corporate China’s growing ambitions to acquire US assets. Anbang’s acquisition of Starwood would have been the largest takeover of a US company by a Chinese buyer.
“We were attracted to the opportunity presented by Starwood because of its high-quality, leading global hotel brands, which met many of our acquisition criteria,” Anbang said in a statement.
“However, due to various market considerations, the consortium has determined not to proceed further,” Anbang added.
Anbang did not offer Starwood a reason for not following through on its raised offer of March 26, according to people familiar with the matter. They asked not to be identified disclosing confidential discussions.
The reason of withdrawal is simple – Anbang isn’t interested in a protracted bidding war
“The reason of withdrawal is simple – Anbang isn’t interested in a protracted bidding war,” Fred Hu, chairman of Primavera, told Reuters.
It was not immediately clear if Marriott had been planning a counterbid to Anbang’s March 26 offer. Anbang has previously bowed out of smaller deals, but this is the most high-profile deal it has abandoned, people familiar with the matter said.
Starwood said on Monday that Anbang had raised its offer to almost $14 billion. Anbang had already made a $13.2 billion binding and fully financed offer earlier this month. Starwood said on Thursday that Anbang had withdrawn its offer “as a result of market considerations”, which it did not specify. Marriott declined to provide immediate comment.
The move fuelled speculation on what drove Anbang to change course, especially given that many Chinese overseas acquisitions have been encouraged by the country’s authorities.
Chinese financial magazine Caixin reported earlier this month that China’s insurance regulator would likely reject a bid by Anbang to buy Starwood, since it would put the insurer’s offshore assets above a 15 percent threshold for overseas investments.
Should Anbang have clinched an agreement with Starwood, it would have been scrutinised by the Committee on Foreign Investment in the US (CFIUS). However, sources had said that both Starwood and Anbang believed the deal would have received CFIUS clearance.
“My guess is that Starwood wanted either a higher break-up fee, maybe a billion dollars, or a higher price from Anbang to offset the risk,” said Ryan Meliker, an analyst at Canaccord Genuity Group Inc.
In its latest offer, Anbang’s consortium had offered $82.75 per share in cash. Marriott’s latest cash-and-stock offer, which was announced on March 21, is worth around $75 per share.
Starwood shareholders will also receive stock in Interval Leisure Group Inc., worth $6.13 per Starwood share. This is the result of a deal last year to spin off Starwood’s timeshare business and combine it with Interval Leisure Group.
Starwood’s shares fell 4.4 per cent to $79.80 in extended trading, while Marriott shares fell 4.9 per cent to $67.68. This indicates that some Marriott shareholders are disappointed that the company is moving ahead with the deal at such a high price.