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Anbang drops bid for Starwood

April 1, 2016

China's Anbang said it has terminated its multi-billion offer for Westin and Sheraton hotels operator Starwood - ending what would have been the largest takeover of a US company by a Chinese buyer.

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China Anbang Insurance Group
Image: picture-alliance/dpa/Lei Kesi

Anbang's withdrawal also represents a conclusion to a bidding war with Marriott International, which had put forward its own $13.6-billion (11.9-billion-euro) offer for Starwood. A Starwood-Marriott merger would create the world's largest hospitality company, with around 5,700 hotels.

Anbang said it was scrapping the bid "due to various market considerations." People close to the matter said the Chinese company didn't elaborate on its reasons for discontinuing the takeover offer, which it had put together with a consortium including private equity firms J.C. Flowers & Co and Primavera Capital.

"The reason for withdrawal is simple - Anbang isn't interested in a protracted bidding war," said Fred Hu, chairman of Chinese global investment firm Primavera.

Tit for tat

Starwood had already accepted a stock-and-cash merger offer from Marriott in November, which Anbang topped with a $13.2-billion binding and fully financed bid. Marriott then counterbid with its own $13.6-billion proposal. On March 26, Anbang further raised its own offer.

Anaheim Marriott Hotel
Marriott wants to create the world's largest hotel company by buying StarwoodImage: picture-alliance/AP Photo/D. Dovarganes

It was not immediately clear whether Marriott would have countered Anbang once more, but the Chinese insurance company bowed out of the race before then, surprising industry observers now accustomed to watching the massive push from China-based companies towards overseas acquisitions.

"My guess is that Starwood wanted either a higher breakup fee, maybe a billion dollars, or a higher price from Anbang to offset the risk," said Ryan Meliker, an analyst at financial services company Canaccord Genuity.

Marriott shareholders less than thrilled?

Both Starwood and Marriott shares fell upon the announcement of Anbang's exit from negotiations – indicating disappointment on the part of Marriottt shareholders that the deal was going ahead at such a high price.

While Anbang had previously walked away from other merger deals, this is the most high-profile project it has ever dropped, people familiar with the matter told Reuters.

Last year, the little-known insurer purchased New York's iconic Waldorf Astoria for $1.95 billion, establishing itself as a player on the US real estate market. This month, it also agreed to buy Strategic Hotels & Resorts from Blackstone Group LP.

jd/hg (AFP, Reuters)