Marriott International Inc will buy Starwood Hotels and Resorts Worldwide Inc in a cash and stock deal valued at $12.2 billion to create the world’s largest hotel chain.
Starwood shareholders will receive 0.92 shares of Marriott Class A common stock and $2 in cash for each Starwood share held, the companies said on Monday.
The offer translates into $72.08 per share for Starwood, a discount of about 4 per cent to the stock’s Friday close.
Starwood shareholders will also get about $7.80 per share from the spinoff of its timeshare business and the business’s subsequent merger with Interval Leisure Group Inc.
Starwood, the owner of St Regis and Sheraton hotel brands, had indicated in April it was considering strategic options.
The company had reached out to potential bidders InterContinental Hotels Group Plc, Wyndham Worldwide Corp and sovereign wealth funds in July.
Up to Friday’s close, Starwood shares had fallen about 14 per cent since April 29th, when the company said it was exploring strategic alternatives.
The deal is expected to close in mid-2016, the companies said.
Marriott’s president and chief executive officer Arne Sorenson said the merger was “an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace”.
“Greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth and enhance long-term value to shareholders,” she said.
The deal is the largest takeover of a hotel company since Blackstone Group LP bought Hilton for $26 billion in 2007.
Starwood has been exploring options including a sale since the February departure of long time head Frits van Paasschen amid criticism he failed to increase the number of properties carrying Starwood’s brands quickly enough.
The hotel industry in the US is in its sixth year of recovery from the recession and is facing supply surges in cities including New York and Seattle.
In the Americas, revenue per available room - a measure of profitability used by the lodging industry – increased 6.6 per cent this year through September, according to STR Global.
