M&A

Marriott Expands Overseas With Starwood Deal

The combined company will be the world's largest hotel operator, with 5,500 properties in more than 100 countries.
Matthew HellerNovember 16, 2015

Marriott International said Monday it had agreed to acquire Starwood Hotels & Resorts for $12.2 billion, bringing such brands as Ritz-Carlton and Sheraton under the roof of a combined company with more than a million rooms globally.

Under the terms of the deal, which creates the world’s largest hotel operator, Marriott will pay $72.08 a share in cash and stock for Starwood — a 4% discount to the stock’s closing price on Friday. The companies noted that Starwood’s shareholders will be getting an additional $7.80 from the spinoff of its timeshare business, but the stock was down more than 5% at $71.12 in trading Monday.

Marriott operates such chains as Fairfield Inn & Suites and Ritz-Carlton while Starwood’s brands include St. Regis, W, Westin and Sheraton. The combined company would own or franchise 5,500 hotels in more than 100 countries.

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“The driving force behind this transaction is growth,” Marriott CEO Arne Sorenson said in a news release. “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.”

Marriott was drawn in particular to Starwood’s large international presence and its appeal to younger travelers, Sorenson said.

Historically, The Wall Street Journal said, Starwood “has been a strong performer in the high-end hotel market. The company has expanded overseas faster than its rivals; roughly half of its more than 350,000 rooms are outside the U.S.”

Starwood announced in April that it was considering strategic alternatives and, according to Reuters, had reached out to InterContinental Hotels Group, Wyndham Worldwide and sovereign wealth funds for a possible deal.

“To be successful in today’s marketplace, a wide distribution of brands and hotels across price points is critical,” Adam Aron, Starwood’s chief executive, said during a briefing with investors. “Today, size matters.”

Marriott and Starwood haven’t started the process of antitrust review yet, but Sorenson said Marriott has about 10% of the hotel rooms in the U.S., while Starwood has about 3% to 4%.

“We have been in the business for a long time but Starwood is more global than Marriott is,” Sorenson, said.