Marriott International, Inc. and Starwood Hotels & Resorts Worldwide, Inc. have announced that the boards of directors of both companies have unanimously approved a definitive merger agreement under which the companies will create the world’s largest hotel company.
The transaction combines Starwood’s leading lifestyle brands and international footprint with Marriott’s strong presence in the luxury and select-service tiers, as well as the convention and resort segment, creating a more comprehensive portfolio. The merged company will offer broader choice for guests, greater opportunities for associates and should unlock additional value for Marriott and Starwood shareholders.
Combined, the companies operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide. The combined company’s pro forma fee revenue for the 12 months ended September 30, 2015 totals over $2.7bn (€2.5bn).
Total consideration to be paid by Marriott totals $12.2bn (€11.4bn) consisting of $11.9bn (€11.2bn) of Marriott International stock, based on the 20-day VWAP (volume weighted average price) of Marriott stock ending on November 13, 2015, and $340m (€319m) of cash, based on approximately 170 million fully diluted Starwood shares outstanding at September 30, 2015.
Arne Sorenson, president and chief executive officer of Marriott International, said: “The driving force behind this transaction is growth. This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace. This 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. Today is the start of an incredible journey for our two companies. We expect to benefit from the best talent from both companies as we position ourselves for the future. I know we’ll do great things together as The World’s Favorite Travel Company.”
Adam Aron, Starwood Hotels & Resorts Worldwide chief executive officer on an interim basis, said: “We are excited to play a vital role in the creation of the biggest and best hotel company in the world with tremendous upside potential. The combination of our two companies brings together the best in innovation, culture and execution. Our guests and customers will benefit from so many more options across 30 hotel brands, while our hotel owners and franchisees will derive value from our combined global platform and efficiencies. We are also delighted that our associates will have expanded opportunities as part of a larger organization that is consistently recognized as one of the best companies to work for in the world.”
One-time transaction costs for the merger are expected to total approximately $100 to $150m (€94 - €140m). Transition costs are expected to be incurred over the next two years. They cannot be estimated at this time, but are expected to be meaningful.
Arne Sorenson will remain president and chief executive officer of Marriott International following the merger and Marriott’s headquarters will remain in Bethesda, Maryland. Marriott’s board of directors following the closing will increase from 11 to 14 members with the expected addition of three members of the Starwood board of directors.
The transaction is subject to Marriott International and Starwood Hotels & Resorts Worldwide shareholder approvals, completion of Starwood’s planned disposition of its timeshare business, regulatory approvals and the satisfaction of other customary closing conditions. Assuming receipt of the necessary approvals, the parties expect the transaction to close in mid-2016.
Lazard and Citigroup are serving as financial advisors to Starwood Hotels & Resorts Worldwide and Deutsche Bank Securities is the financial advisor to Marriott International. Cravath, Swaine & Moore is serving as legal counsel to Starwood Hotels & Resorts Worldwide and Gibson, Dunn & Crutcher is serving as legal counsel to Marriott International on the transaction.
