There’s news out again this morning about the quest for Starwood Hotels. Marriott appears to have increased their offer. Quoting from this morning’s press release:
Revised Terms Value Starwood at $79.53 Per Share or $13.6 Billion;
Total Per Share Value of $85.36 With Separate ILG Transaction Consideration
- Starwood’s Board of Directors determined that revised terms from Marriott constitute a superior proposal compared to previously announced offer by Consortium led by Anbang Insurance Group.
- Increased cash consideration to $21.00 for each share of Starwood common stock.
- Revised exchange ratio of 0.80 shares of Marriott common stock for each share of Starwood common stock.
- Targeted annual G&A synergies increased to $250 million run-rate.
- Marriott and Starwood special stockholder meetings to be held on April 8, 2016 with transaction closing planned for mid-2016.
I honestly didn’t think Marriott would increase their bid for Starwood after Anbang came back with their second offer. The back-and-forth has certainly been good for Starwood shareholders, pushing the value of the company to almost $14 billion.
One of the interesting comments to come out of this latest bid is that Marriott now believes it can wring $250 million a year in synergies out of the combination of the two companies, where their most recent bid only had that number at $200 million. That’s a soft way for them to make it look like they’re increasing their bid over Anbang, who can’t claim the same sorts of synergies since it’s a straight acquisition play. I frequently see numbers like that as funny money in a deal like this. Sure, it could be true. The numbers could ultimately be higher or lower based on so many factors, both those related to the merger and those not. But, it makes the new Marriott offer look better.
Considering that it looked like Marriott was getting a bit of a deal with their first offer, these revised offers are probably a more reasonable value for the company.
But, it’s still a bad deal for Starwood Preferred Guest members. Marriott will almost certainly dismantle the SPG program, which I consider far superior to the Marriott Rewards program. Where Starwood regularly rewards their elite members with benefits like suite upgrades and guaranteed late check-out (that one can sometimes take some elbow grease) Marriott lags behind in these key areas.
They could always decide to adopt these benefits but I’m skeptical they’ll wake up as a result of the merger and decide they need to be more rewarding to significantly more loyalty members. That’s the rub for SPG folks. Marriott Rewards is a significantly bigger program. While there’s some overlap between the two, there are plenty of Marriott Rewards members who would be pretty perturbed if Marriott kept SPG separate and more rewarding than what Marriott Rewards members receive. So, they’re likely to normalize.
That also means there’s a good chance that Starpoints go away and the conversion to Marriott Rewards points isn’t one I would expect to be favorable for SPG members. I value my SPG points much more highly than Marriott Rewards and haven’t actually redeemed any Marriott Rewards points for myself in a very long time (5-7 years?).
I’ll be rooting for Anbang to come back with a revised offer, but as each successive offer comes in, I’m less enthusiastic it will happen. I was pretty sure Anbang’s most recent offer would be the winner. Marriott also snuck in an extra $50 increase in their break-up fee, taking it to $450 million. With the break-up fee to Marriott in the mix, one would think that a new winning offer needs to represent a value of over $14 billion.
Once again, I’m left wondering (along with thousands of others) whether all that time I invested earning lifetime SPG status is now worthless.
Side note: I really appreciate everyone who weighed in on our personal family issues the last few days. I’m doing my best to reply to each of you while juggling getting caught up on life and spending some time with my family while we all heal a bit. If I didn’t reply to your comment yet, I have seen it. We’re very thankful for all the folks who took a few minutes to share some thoughts with us. Hearing from others is definitely helping us focus on all the positive memories.