Marriott International and Starwood Hotels & Resorts Worldwide have announced a groundbreaking partnership 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 momentous deal means that the combined company will boast 1.1 million rooms in more than 5,500 hotels, spanning the globe in over 100 countries.
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 $2.7 billion.
Under the terms of the agreement, at closing, Starwood shareholders will receive 0.92 shares of Marriott International, Inc. Class A common stock and $2.00 in cash for each share of Starwood common stock. On a pro forma basis, Starwood shareholders will own approximately 37% of the combined company’s common stock after completion of the merger using fully diluted share counts as of September 30, 2015. Total consideration to be paid by Marriott totals $12.2 billion consisting of $11.9 billion of Marriott International stock, based on the 20-day VWAP (volume weighted average price) of Marriott stock ending on November 13, 2015, and $340 million of cash, based on approximately 170 million fully diluted Starwood shares outstanding at September 30, 2015. Based on Marriott’s 20-day VWAP ending November 13, 2015, the merger transaction has a current value of $72.08 per Starwood share, including the $2 cash per share consideration. Starwood shareholders will separately receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with Interval Leisure Group, which has an estimated value of approximately $1.3 billion to Starwood shareholders or approximately $7.80 per Starwood share, based on the 20-day VWAP of Interval Leisure Group stock ending November 13, 2015. The timeshare transaction should close prior to the Marriott-Starwood merger closing.
Commenting on the new partnership president and chief executive officer of Marriott International Arne Sorenson, 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.”
Also commenting on the partnership, Bruce Duncan, Chairman of the Board of Directors of Starwood Hotels & Resorts Worldwide, said: “During our comprehensive review of strategic and financial alternatives, it was clear that our talented people, world-class brands, global leadership and spirit of innovation were much admired and key drivers of our value. Our board concluded that a combination with Marriott provides the greatest long-term value for our shareholders and the strongest and most certain path forward for our company. Starwood shareholders will benefit from ownership in one of the world’s most respected companies, with vast growth potential further enhanced by cost synergies. Starwood’s shareholders will also receive the value of the previously announced sale of our vacation ownership business to Interval Leisure Group, which is not part of this transaction.”