Starwood Rival Takeover Bid: What It Means for Brands, Executives and Shareholders

Starwood Hotels & Resorts' board of directors has exactly until 11:59 p.m. Eastern this Thursday to make a big decision about the future of the global hotel company. At stake is whether or not the Stamford, Connecticut-based company will continue with its $12.2 billion merger agreement with Marriott, or whether it will accept a new $13 billion bid from a group of companies led by Anbang Insurance Group, J.C. Flowers & Co., and Primavera Capital Group. We already know what Marriott is offering to Starwood — primarily, the chance to create the world's largest hotel company, with 1.1 million rooms in more than 5,500 hotels, spread out over 30 brands. If the Marriott-Starwood deal goes through as planned, it would also create the largest hotel loyalty program in the world, and it would give Marriott access to billions in real-estate assets that the company can sell. If Starwood decides to accept this new bid, however, it would have to pay a $400 million breakup fee to Marriott. But, what can this new offer potentially bring to Starwood, and why might it be seriously considered? Cash Upfront For one thing, although non-binding and highly conditional, this new offer is all cash, and sources close to the deal note that it's an estimated 13- to 20-percent premium on what Marriott is currently offering to Starwood. "That certainly has its advantages," says David Loeb, managing director and senior real estate research analyst for Milwaukee-based Baird Equity Research. "Many investors prefer cash deals so they can decide whether or not they want to own Marriott stocks." Still, Loeb says Starwood's board has to determine whether or not it wants to go with this cash deal or whether it wants to go with Marriott, and see how Marriott's stock does over the long term. Stock watchers currently estimate that Marriott's deal values Starwood at approximately $62 to $67 a share, versus the $76 per share being offered by the consortium. "When you put all the pieces together, it's an attractive