By Nicole Encalada,
International Business Writer
Marriott International Inc. enthusiastically announced a $12.2 billion acquisition on its website back in November of 2015; claiming a merger with Starwood Hotels & Resorts Worldwide would create the largest hotel company in the world. However, on Monday, the news was revealed that right in the midst the merger deal between the two luxury hotel companies, Anbang Insurance Group Co., a Chinese insurance company, hastily jumped at the opportunity to place an unsolicited bid of $12.8 billion to buyout Starwood Hotels.
Yet, this is not the only massive buyout in Anbang’s repertoire. The New York Times reported that the Chinese company purchased Strategic Hotels & Resort from Blackstone Group for $6.5 billion just a few weeks prior to its recent bid. The company also reported that it would keep Starwood’s headquarters in the United States and would not implement any layoffs.
What is more curious is that just last year, Anbang got a hold of New York’s historic Waldorf-Astoria hotel for $2 billion. In respects to the acquisition, Chairman Xiaohui Wu made comments during a recruitment event at Harvard, “Recently, news regarding our Waldorf purchase flooded the Internet in China, which brought us extra brand recognition and business opportunities. This is what I call the spillover benefits”. Since the acquisition, the hotel has gained great recognition amongst the Chinese. For this reason, Chairman Wu even claimed that the purchase of this hotel was “very cheap” in his eyes, meaning the investment was well worth the money spent.
Anbang Insurance Group is a consortium of investors which includes private equity firms J.C. Flowers &Co. and Primavera Group. The Beijing-based company was founded in 2014 with an original focus on car insurance. The company currently manages more than $292.3 billion in assets and is privately held. The hospitality industry is not their only win. In the last year, Anbang even took over Tong Yang Life, a Korean insurance group, and Delta Lloyd, a Dutch insurance group.
The bid seems to be a part of the company’s long-term goal as it will bring continuous cash flows and not to mention, strong brand recognition if the acquisition pulls through. The expansion can even be seen as a response to an influx of wealthier Chinese tourists that have been visiting the United States. Anbang has even made previous comments suggesting that it has been attempting to delve into Europe and North American markets.
Such an extravagant offer does not come without its setbacks. Starwood Hotels will have to pay a termination fee of $400 million if it decides to accept the bid or if it withdraws the recommendation to its shareholders to vote in favor of the Marriott merger. Shareholders of both Marriott and Starwood were anticipating to vote on Mar. 28 to decide on the potential merger, however, Marriott gave Starwood a chance to contemplate their decision by giving them a waiver that expires on Mar. 18. Regardless, it is suspected that Marriott will sweeten up their deal, so to speak, in order to have the outcome be in their favor.
It should not come as a surprise that these Chinese M&A deals are expanding as rapidly as they are. Xiang Junbo, head of China’s insurance regulator, wrote that Chinese insurers should look to overseas for investments. These insurers also are not wasting any time when it comes to acquiring high-yielding assets. According to the New York Times, Wall Street bankers and lawyers also anticipated Chinese companies to invest in U.S. assets.
A version of this article appeared in the Tuesday, March 22nd print edition.
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