Will Anbang’s $13B Bid for Starwood Derail Marriott’s Mega-Merger?

Sixteen landmark hotels is not enough. If you’re China’s most hospitality-happy insurer — you have to get your own chain.

After signing a $6.5 billion deal last week to purchase the Strategic Hotels & Resorts portfolio from Blackstone, Anbang Insurance Group is leading a $12.8 billion bid for Starwood Hotels & Resorts Worldwide Inc, according to media reports.

Anbang, which also bought the Waldorf Astoria last year for $1.95 billion, is being joined in the $76 per share offer by US private equity firm JC Flowers and Chinese investment company Primavera Capital, said an account in the Financial Times.

Starwood alerted the world to the new bid earlier today, potentially derailing a pending $12.2 agreement it had signed with Marriott International in November. Starwood’s board has pointed out that, while it still backs Marriott’s offer, the company is free to discuss alternative proposals until March 17^th, according to a story in the Wall Street Journal.

Marriott Offer for Starwood Outdone by Chinese Bid

A number of Chinese organisations had been mentioned as potential competitors for Starwood after the New York stock exchange-listed hospitality chain announced in April last year that it had hired investment bank Lazard to explore strategies that could include sale of the company.

However, potential mainland suitors, including sovereign wealth fund China Investment Corporation (CIC) lost out to Marriott’s offer of stock and cash then valued at $12.18 billion ($72.08 per share) last November. However, the value of that offer has slid to around $11 billion, after Marriott shares declined 6.5 percent in recent months, according to a Reuters story.

With shareholders not due to vote on the Marriott offer until March 28^th, a window remains for Anbang and its consortium partners to mount a counter-offer.

In a statement issued today, Marriott said that Starwood had notified it of a counteroffer on March 11^th, and specified that a consortium led by Anbang was its competitor in the deal. Marriott said that it remains committed to its existing offer, and characterised the Anbang bid as “an unsolicited indication of interest” that was “highly conditional and non-binding.”

Anbang’s partners in the Starwood bid centre around a group of Goldman Sachs alumni, with Beijing-based Primavera – which was a pre-IPO investor in Alibaba Group – being run by former Goldman Greater China head Fred Hu. New York-based JC Flowers, which last year sold Belgian insurer Fidea NV to Anbang for an undisclosed amount, is controlled by billionaire former Goldman partner J Christoper Flowers.

Chinese Like Hotel Investments

Starwood’s 1,300 properties under brands including Westin, Sheraton and W are a major prize as Chinese investors continue to favor the hotel industry.

Besides Anbang’s hospitality acquisitions, other Chinese insurers have helped to push up values of hotel assets, with Sunshine Insurance buying a hotel for Sydney for $401 million in 2014, and then the Baccarat Hotel in New York last year for $230 million.

And Chinese hotel acquisitions have not all been about property values, as mainland investors have also been pursuing hotel brands. Shanghai-based Jin Jiang Group paid a reported $1.49 billion in 2014 to purchase France’s Louvre hotel chain, and at least two Chinese investors were in discussions with Carlyle Group last year to buy its Groupe B&B Hotel chain in Europe.

While Anbang is already China’s biggest cross-border investor in real estate, with more than $9.5 billion in outbound investments, it has also been acquiring assets in other industries.

Last month the company run by Wu Xiaohui, who is married to the grand-daughter of Deng Xiaoping, bought South Korean insurer Tongyang for $1.06 billion, after last year having acquired 10 percent of China Minsheng Banking for $4.88 billion. Also in 2015, the company bought Delta Lloyd Bank Belgium for $273 million.