Marriott International has just (Nov 16) revealed it is acquiring Starwood Worldwide, creating the world’s largest hotel company.
The boards of directors of both companies have unanimously approved a definitive merger agreement and the transaction combines Starwood’s leading lifestyle brands and international footprint with Marriott’s strong presence in the luxury and select-service tiers, as well as the convention and resort segment, creating a more comprehensive portfolio.
Under the terms of the agreement, at closing, Starwood shareholders will receive 0.92 shares of Marriott International, Inc. Class A common stock and $2.00 in cash for each share of Starwood common stock.
On a pro forma basis, Starwood shareholders would own approximately 37 percent of the combined company’s common stock after completion of the merger using fully diluted share counts as of September 30, 2015.
Total consideration to be paid by Marriott totals $12.2 billion consisting of $11.9 billion of Marriott International stock, based on the 20-day VWAP (volume weighted average price) of Marriott stock ending on November 13, 2015, and $340 million of cash, based on approximately 170 million fully diluted Starwood shares outstanding at September 30, 2015.
“The driving force behind this transaction is growth. This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace,” said Marriott International President and Chief Executive Officer, Arne Sorenson.
“This greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth and enhance long-term value to shareholders.
“Today is the start of an incredible journey for our two companies… We expect to benefit from the best talent from both companies as we position ourselves for the future.”
Marriott International said it expects to accelerate the growth of Starwood’s brands, leveraging Marriott’s worldwide development organization and owner and franchisee relationships. It said the combined company would have a “broader global footprint, strengthening Marriott’s ability to serve guests wherever they travel”.
Marriott also said it remains committed to its management and franchise strategy, “minimizing capital investment in the business to generate attractive shareholder returns”.
“We have competed with Starwood for decades and we have also admired them,” said J.W. Marriott, Jr., Executive Chairman and Chairman of the Board of Marriott International. “I’m excited we will add great new hotels to our system and for the incredible opportunities for Starwood and Marriott associates.
“I’m delighted to welcome Starwood to the Marriott family,” he said.
Sorenson will remain President and Chief Executive Officer of Marriott International following the merger and Marriott’s headquarters will remain in Bethesda, Maryland.
Marriott’s Board of Directors following the closing will increase from 11 to 14 members with the expected addition of three members of the Starwood Board of Directors.
Bruce Duncan, Chairman of the Board of Directors of Starwood Hotels and Resorts Worldwide, said: “During our comprehensive review of strategic and financial alternatives, it was clear that our talented people, world-class brands, global leadership and spirit of innovation were much admired and key drivers of our value.
“Our board concluded that a combination with Marriott provides the greatest long-term value for our shareholders and the strongest and most certain path forward for our company. Starwood shareholders will benefit from ownership in one of the world’s most respected companies, with vast growth potential further enhanced by cost synergies. Starwood’s shareholders will also receive the value of the previously announced sale of our vacation ownership business to Interval Leisure Group, which is not part of this transaction,” Duncan said.
The transaction is subject to Marriott International and Starwood Hotels and Resorts Worldwide shareholder approvals, completion of Starwood’s planned disposition of its timeshare business, regulatory approvals and the satisfaction of other customary closing conditions.
Assuming receipt of the necessary approvals, the parties expect the transaction to close in mid-2016.
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