The Anbang Insurance Group of China and its partners withdrew their $14 billion takeover offer for Starwood Hotels and Resorts on Thursday, opening the door for Marriott's $13.25 billion offer and paving the way for the creation of the world's biggest hotel company.
The abrupt withdrawal highlights the newfound muscle of Chinese companies in the high-stakes global business of mergers and acquisitions and throws into question their ability to close such deals. So far this year, there have been $92 billion of foreign takeovers announced by Chinese companies. However, U.S. regulators are yet to sign off on many of them.
"We were attracted to the opportunity presented by Starwood because of its high-quality, leading global hotel brands, which met many of our acquisition criteria, including the ability to generate consistent, long-term returns over time," stated Fred Hu, chairman of Primavera Capital, a Chinese private equity firm that was part of Anbang's consortium.
"However, due to various market considerations, the consortium has determined not to proceed further," Hu added, referring to the joint bid it had put together with private equity firms J.C. Flowers & Co and Primavera Capital Ltd.
"While attracted to Starwood's high-end global hotel portfolio, at the end of the day Anbang is a disciplined buyer," Mr. Hu said in an email.
The surprise move comes just days after Anbang sweetened its bid for Starwood to $14 billion, or $82.75 a share in cash - an offer under review that Starwood said was "reasonably likely to lead to a "superior proposal" over Marriott's $13.6 billion bid.
That Anbang didn't ultimately follow through after bidding aggressively for Starwood is bound to reinforce concerns among U.S. companies that Chinese counterparts still aren't ready for the big leagues in M&A.
Starwood will now stick with Marriott's most recent offer. After Anbang's exit, Marriott encouraged shareholders of both companies to support its offer in a vote set for April 8.
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