Starwood backs away from merger with Marriott

The Chinese insurance company Anbang Group has offered to acquire Starwood Hotels and Resorts Worldwide for $78 per share in cash, or the equivalent of $13.3 billion. Last November 17, Starwood had agreed to merge with Marriott International through a stock-and-cash deal valued at $13.06 billion as of Thursday’s close. That merger would have created the world’s largest hotel company.

The Wall Street Journal and other news outlets report that Starwood intends to set aside its deal with Marriott, which has until March 28 to revise its offer. If it ultimately accepts Anbang’s bid, Starwood would have to pay Marriott a $400 million termination fee. The Real Deal, which covers New York real estate, reports today that Starwood had accepted Anbang’s takeover offer

Anbang, based in Beijing, made headlines two years ago when it paid about $2 billion to acquire New York City’s landmark Waldorf Astoria hotel. Days before it upped its bid for Starwood from $76 per share, Anbang agreed to purchase the 16- property Strategic Hotels & Resorts from Blackstone Group for $6.5 billion including debt.

Time magazine’s Rana Foroohar notes that Anbang’s buying spree comes at a time when investors have been fleeing China’s slowing economy. About $1 trillion in capital left China last year, and “one way it’s going out the door is via acquisitions of foreign firms,” Foroohar writes. Dealogic estimates that Chinese firms spent $106 billion on overseas acquisitions in 2015, and nearly that much so far this year.

Anbang’s well-connected owner, Wu Xiaohui, is married to the granddaughter of Deng Xiaoping, the Communist leader who put China on a path toward a more market-driven economy. Anbang’s largest shareholders are state-owned companies such as Shanghai Automotive Industry Group Corp and the oil giant Sinopec Group, according to Fortune magazine.

The Real Deal estimates that Anbang’s offers for Strategic and Starwood are roughly equal to the total volume of Chinese investment in U.S. commercial real estate from 2007 to 2015.