Graphics: GT
Chinese insurer's price is higher, but Marriott offers experience
Anbang Insurance Group, one of China's top corporate acquirers, has challenged hotel group Marriott International Inc's merger with U.S. hotel operator Starwood Hotels & Resorts Worldwide Inc with a $12.8 billion cash offer.
But cash alone probably won't be enough, and Starwood is likely to stick with Marriott, which offers experience in the hotel sector, domestic experts told the Global Times on Tuesday.
Anbang's non-binding bid, announced on Monday by Marriott, is an offer to acquire all of Starwood's shares for $76.00 per share in cash, a much better price than the $67.22 per share valuation proposed by Marriott, according to Reuters on Monday.
Starwood said on Monday that it had commenced "discussions" with Anbang on the acquisition proposal, but it noted that its board of directors "has not changed" its recommendation in support of the merger with Marriott.
Some overseas analysts have said that the price gap between the two offers should - in theory - put Anbang in a more competitive position. U.S.-based financial network CNBC quoted U.S. stock reviewer Jim Cramer on Monday as saying that he'd bet on Anbang. "Marriott's price to me was almost a giveaway," he noted.
Zhu Zhengyu, a tourism analyst at Beijing-based market research firm Analysys International, nevertheless said that Starwood is unlikely to abandon the merger with Marriott just because of price.
"Starwood's business is in a recession now. I think it would rather choose a buyer who has experience in the hotel management sector and can help preserve the brand of Starwood," Zhu told the Global Times on Tuesday.
Marriott also stressed in its statement that it is committed to acquiring Starwood for the sake of creating "the world's largest hotel company," which will offer shareholders "significant equity upside and greater long-term value." Compared with Marriott, Anbang's objectives appear more complex, Zhu said.
"First, the [Chinese] government has encouraged domestic companies to invest abroad to expand their profits and promote the internationalization of the yuan. Anbang's move can to some extent be considered as a response to the government's call," Zhu said.
Second, as more Chinese travel abroad and spend more, the hotel sector has promising prospects. That's prompted Anbang to increase investment in this sector, Zhu noted.
"Being an insurance group that counts on stability, Anbang needs to invest in areas with a stable flow of cash, and the hotel sector is a good choice," Zhu said.
A Beijing-based securities analyst who would only give the surname of Wang told the Global Times on Tuesday that now is a good time for Anbang to make the bid.
"The U.S. Federal Reserve is likely to raise interest rates soon. This will cause the dollar to appreciate and add to the costs of acquisitions by Chinese companies like Anbang," Wang noted.
Wang also noted that compared with acquisitions in other areas, Anbang's acquisition in the hotel sector is more likely to pass the U.S. government's national security review.
Anbang has made a series of overseas acquisitions in the hotel sector. On Monday, it agreed to acquire Strategic Hotels & Resorts Inc for $6.5 billion, by far the biggest Chinese investment in U.S. real estate assets, Reuters reported on Monday.
Anbang also acquired the Waldorf Astoria Hotel in New York for about $2 billion in October 2014.
Zhu nevertheless cautioned that when domestic companies buy overseas hotels, it's not enough to just expand their asset scale. The buyers should also focus on increasing management efficiency after the acquisition.
Neither Starwood nor Anbang could be contacted for comment as of press time.
Two other companies - U.S. private investment firm J.C.Flowers & Co and Chinese investment firm Primavera Capital Group - have joined Anbang in the acquisition proposal, domestic finance website qq.com reported on Tuesday.
