China's Anbang Insurance has abandoned its $14 billion bid for Starwood Hotels & Resorts Worldwide Inc, paving the way for Marriott International Inc to buy the Sheraton and Westin hotels operator. The surprise withdrawal marks an anticlimactic end to a bidding war that had pitted Marriott's ambitions to create the world's largest lodging company, with about 5,700 hotels, against Anbang's drive to create a vast portfolio of US real estate assets. It also represents a blow to corporate China's growing ambitions to acquire US assets.
Anbang's acquisition of Starwood would have been the largest takeover of a U.S. company by a Chinese buyer. "We were attracted to the opportunity presented by Starwood because of its high-quality, leading global hotel brands, which met many of our acquisition criteria, including the ability to generate consistent, long-term returns over time," Anbang said in a statement. "However, due to various market considerations, the consortium has determined not to proceed further," Anbang added, referring to the joint bid it had put together with private equity firms J.C. Flowers & Co and Primavera Capital Ltd.
Anbang did not offer Starwood a reason for not following through on its raised offer of March 26, according to people familiar with the matter. They asked not to be identified disclosing confidential discussions. “The reason of withdrawal is simple - Anbang isn’t interested in a protracted bidding war,” Fred Hu, chairman of Primavera, told Reuters in an email.
It was not immediately clear if Marriott had been planning a counterbid to Anbang’s March 26 offer.
Anbang has previously bowed out of smaller deals, but this is the most high-profile deal it has abandoned, people familiar with the matter said.
Starwood said on Monday that Anbang had raised its offer to almost $14 billion. Anbang had been expected to firm up that non-binding offer, so that Starwood would formally declare it superior to Marriott’s.
Anbang had already made a $13.2 billion binding and fully financed offer earlier this month, which Starwood accepted as superior. Had Marriott not counterbid on March 21, Starwood would have proceeded with the earlier Anbang offer. Starwood said on Thursday that Anbang had withdrawn its offer “as a result of market considerations,” which it did not specify. Marriott declined to provide immediate comment.
The move fueled speculation on what drove Anbang to change course, especially given that many Chinese overseas acquisitions have been encouraged by the country’s authorities. Chinese financial magazine Caixin reported earlier this month that China’s insurance regulator would likely reject a bid by Anbang to buy Starwood, since it would put the insurer’s offshore assets above a 15 per cent threshold for overseas investments.
Should Anbang have clinched an agreement with Starwood, it would have been scrutinised by the Committee on Foreign Investment in the United States (CFIUS), an interagency panel that reviews deals to ensure they do not harm national security. However, sources had said that both Starwood and Anbang believed the deal would have received CFIUS clearance.
"My guess is that Starwood wanted either a higher break-up fee, maybe a billion dollars, or a higher price from Anbang to offset the risk," said Ryan Meliker, an analyst at Canaccord Genuity Group Inc.
Reuters