Monday, April 11, 2016

Shareholders approve Starwood/Marriott merger

Shareholders of Starwood Hotels & Resorts and Marriott International, Inc. on April 8 approved the merger of the two companies that was approved unanimously by the boards of directors for the two companies in November of last year.

The $12bn transaction will create the world's largest hotel company by combining Starwood’s (NYSE: HOT) leading lifestyle brands and international footprint with Marriott’s (NASDAQ: MAR) strong presence in the luxury and select-service tiers, as well as the convention and resort segment, to create the world’s biggest hotel company with 5,500 hotels and resorts in more than 100 countries. The companies have said the merger will create, “[A] more comprehensive portfolio.”

The combined company will be called Marriott International after the transaction closes, a company spokesperson told TheTravelPro in an email.

The transaction is expected to close in mid-2016 and is still subject to the completion of Starwood’s planned disposition of its timeshare business, regulatory approvals and the satisfaction of other customary closing conditions, the companies noted.

Under the merger, the Starwood Preferred Guest (SPG) and the Marriott Rewards loyalty programs will be folded into each other to, “Integrate the very best and Marriott Rewards,” the companies said. However, the companies do not anticipate launching a newly combined program until 2018. Accordingly, SPG will continue to run separately until such time as the two programs are combined.

At present, Marriott has approximately 75 percent of the rooms in the United States spread across brands that include Marriott Hotels, J.W. Marriott, Ritz Carlton, Renaissance Hotels, Delta Hotels, Gaylord Hotels, Courtyard, Resident Inn, Springhill Suites, Fairfield Inns & Suites and TownePlace Suites.

Starwood derives nearly 67 percent of its revenue from properties outside the U.S., CNBC reported. Those properties include Sheraton, Westin, W Hotels, Le Meridien, St. Regis, Aloft, the Luxury Collection and Four Points, among others.

As the companies progress toward completion of the merger, Starwood reports it continues to expand its reach, bringing its guests, “New access to one-of-a-kind hotels from Tribute Portfolio and Design Hotels plus exciting new SPG Moments experiences through our unique partnerships with Major League Baseball, Mercedes AMG Petronas and more.”

Under the terms of the merger agreement, Starwood shareholders will receive 0.92 shares of Marriott Class A common stock and $2 in cash for each share of Starwood common stock when the transaction closes. On a pro forma basis, Starwood shareholders would own approximately 37 percent of the combined company’s common stock after completion of the merger.

Total consideration to be paid by Marriott totals $12.2bn consisting of $11.9bn of Marriott International stock and $340m in cash.

Starwood shareholders will separately receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with Interval Leisure Group, which has an estimated value of approximately $1.3bn to Starwood shareholders or approximately $7.80 per Starwood share. The timeshare transaction should close prior to the closing of the Marriott-Starwood merger.

Combined, the companies operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide and had combined pro forma fee revenue of over $2.7bn for the 12 months ended Sept. 30. Together, the companies have 54 million Marriott Rewards members and 231 million Starwood Preferred Guest member.

Marriott expects to deliver at least $200m in annual cost savings in the second full year after closing by leveraging operating and general and administrative efficiencies, the companies said.

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