Marriott To Acquire Starwood Hotels & Resorts In $12.2 Bln Cash, Stock Deal

(RTTNews) - Marriott International, Inc. (MAR) and Starwood Hotels & Resorts Worldwide, Inc. (HOT) Monday said the boards of directors of both companies have unanimously approved a definitive merger agreement to create the world's largest hotel company.

Total consideration to be paid by Marriott totals $12.2 billion consisting of $11.9 billion of Marriott International stock and $340 million of cash.

The stock value is based on the 20-day volume weighted average price of Marriott stock ending on November 13, and the cash consideration is based on approximately 170 million fully starwood shares outstanding at September 30.

Under the terms of the agreement, Starwood shareholders will receive 0.92 shares of Marriott Class A common stock and $2.00 in cash for each share of Starwood common stock. Total estimated value to Starwood shareholders is $79.88.

Marriott expects the transaction to be earnings accretive by the second year after the merger, not including the impact of transaction and transition costs. Earnings will benefit from post-transaction asset sales, increased efficiencies and accelerated unit growth, the company said.

On a pro forma basis, Starwood shareholders would own 37 percent of the combined company's common stock after completion of the merger.

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.

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.

The merged company will offer broader choice for guests, greater opportunities for associates and is expected to 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.

One-time transaction costs for the merger are expected to total approximately $100 to $150 million. The transaction is expected to close in mid-2016.

Arne Sorenson will remain President and Chief Executive Officer of Marriott International following the merger and Marriott's headquarters will remain in Bethesda, Maryland.

Following the closing, Marriott's Board of Directors will increase from 11 to 14 members with the expected addition of three members of the Starwood Board of Directors.