A Surprising Tidbit On Anbang’s Failed Offer For Starwood

The last few weeks have been an interesting time for Starwood.  Dating back about 5 months, Starwood accepted a bid from Marriott to acquire Starwood and ultimately merge the two operations.

While the market thought there might be counter-offers, things were really quiet for a few months.  Then, in the home stretch, Anbang came back into the picture and beat Marriott’s offer.  Marriott felt strongly enough about the value of Starwood to increase their offer.  That lead Anbang to raise their offer again.  And subsequently walk away completely.

With the shareholders of both Marriott and Starwood approving the merger today, it reminded me that I needed to loop back to a Wall Street Journal article I read a couple of days ago.  Specifically:

If Starwood had chosen Anbang, the insurer would then have had to seek approval from China’s insurance and foreign-exchange regulators. To allay the concerns of Starwood and its bankers over that, Anbang’s offer included a stunning sweetener, said people familiar with the bid: Anbang and its partners would pay up even if Chinese regulators blocked the tie-up.

Wait, what?

Anbang said they would guarantee the sale even if the Chinese government said they couldn’t buy Starwood.  Let’s think about that from the context of a merger between 2 US companies.  That’s like saying US Airways would hand American Airlines’ shareholders $8 billion (AA’s rough value based on the share defined at merger) if DOJ didn’t approve the deal.

But, this is China.

When I first read what Anbang agreed to, it took me by surprise.  I quickly realized that Anbang must know they already had approval from the Chinese government in the bag (as in, they already bought the rubber stamp necessary).  I guess Anbang’s CEO could be summarily crazy.  But, if he is, I suspect he still bought the rubber stamp.

Anyway, interesting to me.

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