Marriott International has agreed to buy Starwood Hotels and Resorts in a $12.2 billion deal

0
880

Marriott International, Inc. and Starwood Hotels & Resorts Worldwide, Inc.has announced that the boards of directors of both companies have unanimously approved a definitive merger agreement under which the companies will create the world’s largest hotel company.  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.  The merged company will offer broader choice for guests, greater opportunities for associates and should unlock additional value for Marriott and Starwood shareholders.  Combined, the companies operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide.  The combined company’s pro forma fee revenue for the 12 months ended September 30, 2015 totals over $2.7 billion.

Summary of Transaction: 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.  Based on Marriott’s 20-day VWAP ending November 13, 2015, the merger transaction has a current value of $72.08 per Starwood share, including the $2 cash per share consideration.  Starwood shareholders will separately receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with Interval Leisure Group, which has an estimated value of approximately $1.3 billion to Starwood shareholders or approximately $7.80 per Starwood share, based on the 20-day VWAP of Interval Leisure Group stock ending November 13, 2015.  The timeshare transaction should close prior to the Marriott-Starwood merger closing.

Arne Sorenson, President and Chief Executive Officer of Marriott International, said: “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.  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.  I know we’ll do great things together as The World’s Favorite Travel Company.”

J.W. Marriott, Jr., Executive Chairman and Chairman of the Board of Marriott International, said: “We have competed with Starwood for decades and we have also admired them. 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.”

Bruce Duncan, Chairman of the Board of Directors of Starwood Hotels & 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.”

Adam Aron, Starwood Hotels & Resorts Worldwide Chief Executive Officer on an interim basis, said: “We are excited to play a vital role in the creation of the biggest and best hotel company in the world with tremendous upside potential.  The combination of our two companies brings together the best in innovation, culture and execution.  Our guests and customers will benefit from so many more options across 30 hotel brands, while our hotel owners and franchisees will derive value from our combined global platform and efficiencies.  We are also delighted that our associates will have expanded opportunities as part of a larger organization that is consistently recognized as one of the best companies to work for in the world.”

One-time transaction costs for the merger are expected to total approximately $100 to $150 million.  Transition costs are expected to be incurred over the next two years.  They cannot be estimated at this time, but are expected to be meaningful.

Marriott will assume Starwood’s recourse debt at the closing of the transaction.  Marriott remains committed to maintaining an investment grade credit rating and to continue managing the balance sheet prudently after the merger. Marriott expects to maintain our 3.0x to 3.25x adjusted debt to adjusted EBITDAR target.

Arne 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.

The transaction is subject to Marriott International and Starwood Hotels & 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.

Top Starwood hotel brands

• Four Points by Sheraton
• Sheraton Hotels & Resorts
• Aloft
• W Hotels
• Le Meridien
• Westin Hotels & Resorts
• St. Regis® Hotels & Resorts

Top Marriott hotel brands

• The Ritz-Carlton
• EDITION
• JW Marriott
• Renaissance Hotels
• Marriott Hotels & Resorts
• Delta Hotels
• Gaylord
• Courtyard
• Residence Inn
• SpringHill Suites
• Fairfield Inn
• TownePlace Suites by Marriott