The board of Starwood Hotels & Resorts recommended on Friday that the hotel chain accept a newly-sweetened $78 per share buyout offer from China’s Anbang Insurance, pushing aside an earlier merger agreement with Marriott International.
The $13.2 billion deal provides Starwood shareholders with a 19 percent boost in value over the previous offer from Marriott, allows Marriott to receive a $400 million fee for Starwood killing the deal in progress, and could bring some $60 million in fees to an advisory firm partly owned by Blackstone.
Including the $1.95 Waldorf Astoria acquisition in October 2014, a $415 million deal for a New York office building in 2015, the $6.5 billion deal for Strategic Hotels & Resorts earlier this month, and the Starwood acquisition, Blackstone has now been involved in more than $22 billion worth of Anbang acquisitions.
The growing relationship between Blackstone and the Chinese insurer shows the importance of finding overseas partners for a company such as Anbang, and the extent to which global corporations can benefit from building mainland ties.
Chinese Insurer Wins Over Starwood Board With Sweetened Deal
Anbang convinced Starwood’s board to reject the Marriott offer and recommend Anbang’s all cash deal to the company’s shareholders after the Chinese insurance company agreed last week to raise its original $76 per share offer.
While Marriott now has until March 28th to submit a counteroffer, the orginal Marriott offer was mostly stock and the company has made no firm indication that it will top Anbang’s proposal.
Joining Anbang in the acquisition were Chinese private equity firm Primavera Capital, and US private equity house JC Flowers. The sole advisor on the transaction was PJT Partners Inc, a boutique investment bank founded in October last year through combining advisory divisions of Blackstone with PJT Capital LP, an independent financial advisory firm founded by financier Paul J. Taubman.
A financial consultant cited by Reuters indicated that PJT Partners could bring in around $60 million in fees for assisting Anbang with the transaction.
Blackstone Relationship with Anbang Continues to Grow
To Blackstone, however, there are likely to be more important considerations than transaction fees.
While it only advised on the Starwood acquisition, Blackstone has already benefited directly from selling nearly $8.9 billion in real estate to Anbang in less than two years. The direct transactions between the two parties included Blackstone’s February 2015 sale of 717 Fifth Ave, a 26-storey New York office tower to Anbang, as well as the $1.95 billion Waldorf Astoria deal and the $6.5 billion Strategic Hotels sale.
The leaders of the two companies also seem to be showing off their growing relationship through public appearances and are even supporting each other’s causes.
World’s Biggest Property Owner Matched with China’s Hungriest Buyer
Anbang chairman Wu Xiaohui spoke together with Blackstone chairman Stephen Schwarzman at an event at Harvard University last year. At the Harvard gathering, Wu – who is a relative by marriage to former Chinese paramount leader Deng Xiaoping – described Schwarzman as “a good friend” according to an account in Bloomberg.
Part of that friendship may stem from Wu’s support of the Blackstone chief’s scholarship program at Beijing’s Tsinghua University, which Schwarzman has established as his alternative investment house steps up its activities on the mainland. Wu was among the major contributors when the Schwarzman Scholars program raised $333 million to support students at the elite Chinese university.
For Blackstone, the ties with Anbang and other Chinese institutions have some clear potential benefits.
Chinese overseas investment grew to $120 billion in 2015, and Anbang is already the country’s biggest cross-border buyer of real estate assets, according to figures compiled by Mingtiandi.
As the biggest private equity firm on Wall Street, Blackstone’s real estate business has grown from $17.7 billion at the time that it was listed in 2007 to more than $100 billion in assets as of the end of last year. “We’re now, we believe, the largest owner of real estate in the world,” Schwarzman said in an interview with Business Insider last year.
And when the biggest buyer of real estate comes to trust the biggest owner of assets, more deals could be on the way.