Chinese set their sights on biggest US buy yet : Starwood hotels
In what could be the largest-ever Chinese takeover of a U.S. company, at least three big Chinese companies are said to be vying to win Beijing’s approval to bid for the lodging giant Starwood Hotels Worldwide.
The Wall Street Journal, citing people with knowledge of the discussions, says the three are Shanghai Jin Jiang International Hotels HNA Group, parent of Hainan Airlines Co. and sovereign wealth fund China Investment Corp.
Each it is said has presented a separate proposal to the Chinese government over the past two months.
The WSJ says the Chinese government is believed to want only one domestic company to make a bid, so that Chinese companies don’t drive up the price by bidding against one another. The Journal says Beijing is expected in the next few weeks to make its selection.
Starwood has reportedly been running a strategic review process for months and listening to merger bids from companies around the globe. A Starwood spokeswoman declined to comment.The hotel operator based in Stamford, Conn has more than 1,200 properties worldwide including brands like Westin, W Hotels and St. Regis.
Back in April Starwood’s board indicated it would be open to a sale “amid concerns it wasn’t growing as fast as rival hotel operators,” said the WSJ.
People familiar with the discussions told the Journal any bid would come at a premium to Starwood’s current market value of about $12 billion.
In 2007, CIC paid $5.6 billion for a 9.9% stake in Morgan Stanley, currently, until now the largest dollar investment from China in a U.S. company.
Chinese companies’ global ambitions in the hospitality sector were highlighted earlier this year when Anbang Insurance Group paid nearly $2 billion for the Waldorf Astoria hotel on New York’s Park Avenue, a record sales price for a U.S. hotel. Another Chinese insurer paid about $230 million, or the equivalent, or more than $2 million a room for New York’s Baccarat Hotel. That price was an all-time high on a per-room basis.
StarwoodChief Executive Frits van Paasschen abruptly resigned in February after the board lost confidence is his ability to grow the company. In April, Starwood said it had hired investment bank Lazard to help the company explore strategic alternatives including a possible sale or merger.
The WSJ said Starwood has struggled to find a winning formula in the increasingly lucrative limited-service-hotel segment. Its Sheraton brand, which accounts for more than 40% of Starwood’s room total, has lost ground to rivals and Starwood is trying to reinvigorate the brand.
The Committee on Foreign Investment in the United States, whose members include secretaries of Treasury, Homeland Security and Defense, likely would have to approve any Chinese deal for Starwood. “Anything involving Russia or China and remotely connected with national security will draw a closer look,” said Joel Brenner, a lawyer specializing in national security issues.
The committee approved Hilton Worldwide Holdings Inc.’s sale of the Waldorf to the Chinese insurer, but during a visit last month President Barack Obama broke with a longstanding tradition of presidents staying at the Waldorf by opting for another Manhattan hotel. While a senior administration official said, “We constantly reevaluate venues to take into account changing circumstances,” people close to the matter said it was related to the new Chinese owners and questions of security concerns.