Sheraton Changchun Jingyuetan Hotel (Provided to chinadaily.com.cn)
Successful bid would top Shuanghui's $7b bid for Smithfield
Three Chinese companies are planning bids for Starwood Hotels & Resorts Worldwide Inc, which operates the Sheraton, Westin and W hotel chains, in what could be the biggest-ever Chinese takeover of a United States company.
Hotel giant Shanghai Jin Jiang International Hotels (Group) Co Ltd, Hainan Airlines's parent company HNA Group and sovereign wealth fund China Investment Corp are in the fray for Starwood, according to media reports.
The Chinese bids for Starwood come close on the heels of Anbang Insurance Group Co's acquisition of the landmark Waldorf Astoria hotel in New York from Hilton Hotels & Resorts for $1.95 billion in 2014.
According to Dealogic, a market information provider, should the Starwood deal materialize, it would be the largest acquisition of a U.S. company by a Chinese firm. Till date, the largest deal made by a Chinese company in the U.S. is the $7 billion Shuanghui Group spent for pork producer Smithfield Foods Inc in 2013.
On Tuesday, Starwood shares jumped 9.1 percent to close at $74.81 per share, the biggest daily increase since 2009, taking its market value close to $12 billion. When contacted, Starwood refused to provide any details about the bid.
However, it was quite another story for Shanghai Jin Jiang and HNA Group in the stock market. Shanghai Jin Jiang International Hotels Development Co Ltd, a subsidiary of the group, has been suspended from trading. Hainan Airlines Co Ltd, the listed company of HNA Group, fell 0.74 percent to 4.03 yuan (63 U.S. cents) per share.
Even though all the three interested bidders declined to make any comment, their ambition for overseas expansion is quite evident.
"Jin Jiang is moving toward its goal of becoming a leading mega hotel group in the world," said Li Yuebo, a senior analyst at Fuzhou-based Industrial Securities Co.
Jin Jiang has been expanding its presence at home and abroad in the past few years. On Friday, it said it was buying about 81 percent of Keystone Lodging Holdings Ltd for more than 8.26 billion yuan. Keystone Lodging is wellknown for its budget hotel chain such as 7 Days. With this acquisition, Jin Jiang became China's biggest hotelier and moved into the global top five.
Earlier this year, Jin Jiang acquired Europe's second-largest hotel group Groupe Du Louvre for up to 1.21 billion euros ($1.33 billion).
"Acquisitions are the best way for hotel groups to expand abroad as they enable the brand to be known to a larger group of consumers. With more Chinese tourists making overseas trips every year, the hotelier is sure to benefit from the acquisition," Li said.
Li Lei, deputy director of the securities research institute of Minzu Securities Co Ltd, said: "HNA Group is also completing its industry chain globally through acquisitions, including aviation, airport management, logistics and tourism. To reduce business risks, the group has been expanding into related industries through overseas acquisitions, such as aircraft leasing and hotels."
HNA Group acquired a 29.5 percent share in NH Hotels, a Spanish hotel chain, and became its largest shareholder in 2014. The group also purchased a landmark office building in Canary Wharf, a financial district in London, in September.
Xia Yangyang, director of international capital at global property company JLL, said acquisitions are an ideal option for Chinese investors to diversify their global investments and reduce risks.
JLL is expecting China's outbound investment into real estate to reach $20 billion by the end of this year, up from $16.5 billion in 2014.
