Marriott-Starwood Deal Gets Antitrust Clearance From the European Union

Marriott and Starwood are that much closer to completing their mega merger next month. Today, both companies announced they received unconditional clearance from the European Union for Marriott to buy Starwood in a merger transaction originally estimated to be valued at around $13.6 billion in late March/April.

“This is an important merger for the hotel industry and its customers," the European Union commissioner for competition, Margaret Vestager, stated in a release. "Our investigation confirmed that the hotel sector will remain competitive for customers in Europe following the merger, so I am pleased that the commission was able to clear the transaction quickly.”

While the EU's approval represents a big step for Marriott and Starwood, the two companies still need to obtain antitrust clearance from China and other countries, as well as tie up other closing conditions related to the deal. The companies have publicly stated they expect the deal to close next month and until then, they will each operate as separate, independent hospitality companies.

What may be interesting to watch over the next few weeks is what impact, if any, the Brexit vote may have on Marriott's stock price. Immediately following the majority vote by United Kingdom voters to leave the EU, stock prices for many hotel companies, Marriott included, plummeted.

While the fluctuation in Marriott's stock price has no direct impact on the relationship of the merger agreement with Starwood, it could potentially impact the amount of money to be collected by Starwood shareholders.

Under the terms of the agreement approved by shareholders of both companies, Starwood shareholder receive 0.8 shares of Marriott common stock and $21 in cash for each share of common Starwood stock held.

The overall value of the deal as proposed on March 21 was approximately $13.6 billion. Today, given the drop in Marriott's stock price from $71.98 on March 21 to about $61.66 as of June 27, the total value of the deal is now estimated at nearly $12.2 billion (the original estimate of Marriott's first offer to purchase Starwood in November 2015). By contrast, Starwood's stock price today amounted to about $69.64 a share. If we were to estimate the value of what they would receive today if the Marriott deal closed, the total value per share would be about $70.33.

"The math is the math," David Loeb, managing director and senior real estate research analyst for Baird Equity Research." Starwood shareholders are going to get what they are going to get. It's only worth about $70 today [June 27] but it is what it is."

Until the deal closes, the overall value will constantly fluctuate.