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Starwood gets binding $78-a-share offer from Anbang Group

Starwood Hotels & Resorts Worldwide Inc., owner of brands such as Westin, Sheraton and W, said it received a binding $13.2 billion takeover bid from a group led by China’s Anbang Insurance Group Co., a superior offer to one by Marriott International Inc.

Anbang and its partners will pay $78 a share in cash for Starwood, according to a statement Friday. The offer is $2 a share more than the surprise bid the group made last week. It eclipses Marriott’s cash-and-stock deal, which Starwood agreed to in November and is currently worth about $68 a share. The announcement puts pressure on Marriott to counter.

Starwood notified Marriott that it determined the Anbang group’s fully financed bid constitutes a “superior proposal” and that its board intends to terminate the Marriott merger agreement and enter into a definitive pact with the group. Marriott has until 11:59 p.m. New York time on March 28 to negotiate revisions to the existing agreement, according to the statement. Starwood’s shareholder meeting, scheduled for that date, was postponed.

Marriott, in its own statement, said it still believes the combination of the two hotel companies offers the best value to Starwood shareholders and the company is “carefully considering its alternatives.”

Starwood shares rose 5 percent to $80.24 at 9:33 a.m. New York time. Marriott climbed 1.8 percent to $73.06.

An acquisition by Anbang, which requires approval by regulators and Starwood shareholders, would mark the largest-ever takeover of a U.S. company by a Chinese buyer, topping the 2013 purchase of Smithfield Foods Inc. for almost $7 billion including debt. Investors from China are pouring money into U.S. real estate and seeking the prize of international hotel brands amid slowing growth at home. They also seek to capture the surge in Chinese outbound travel.

Starwood, besides being one of the world’s biggest hotel operators, owns real estate worth about $4 billion, including the landmark St. Regis off Fifth Avenue in Manhattan, according to David Loeb, an analyst at Robert W. Baird & Co.

“The assets are world-class, with some of the highest-quality product in the most sought-after locations and are a key underpinning to Starwood’s value,” Loeb wrote in a March 14 note to clients.

Anbang started a push into U.S. hotels last year, buying Manhattan’s Waldorf Astoria for a record $1.95 billion. The Beijing-based insurer has also agreed to buy Strategic Hotels & Resorts Inc., an owner of 16 luxury U.S. properties, from Blackstone Group LP for about $6.5 billion, according to people with knowledge of the matter.

Anbang’s offer is all cash, whereas only $2 of Marriott’s offer is, with the rest in Marriott stock. Anbang’s partners in the Starwood bid include private equity firm J.C. Flowers & Co. and Chinese investment firm Primavera Capital. Primavera was founded by Fred Hu, who previously ran China dealmaking for Goldman Sachs Group Inc.

A merger of Starwood and Marriott would create the world’s largest hotel operator. Under the terms of their binding agreement, Marriott would be paid a breakup fee of $400 million.

Chinese investors put a premium on owning real estate. Anbang Chairman Wu Xiaohui told Harvard University students a month before buying the Waldorf how solidly it was built. By contrast, U.S. companies such as Marriott and Starwood have been trying to shed real estate, seeing buildings as a capital burden requiring constant upkeep and favoring the high returns from managing and franchising hotels.

The transaction may trigger a review by the Committee on Foreign Investment in the U.S., a government panel that examines acquisitions of U.S. businesses by foreign buyers to protect national security. Anbang cleared a CFIUS review of its purchase of the Waldorf, a deal that initially raised concerns about spying risks because the hotel at the time was home to the U.S. ambassador to the United Nations.

In North Texas, Starwood owns or operates several hotels and has plans for several more. Among Starwood’s hotels, are the Sheraton in downtown Fort Worth and in Arlington. Starwood has plans for several Aloft brand hotels in the area, including in Plano, Arlington and Irving.

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