China’s Anbang Insurance Group Co (安邦保險集團) has challenged Marriott International Inc’s merger with US hotel operator Starwood with a US$12.8 billion cash offer, burnishing its credentials as one of China’s top corporate acquirers.
The non-binding bid, unveiled on Monday, just days after Anbang agreed to acquire Strategic Hotels & Resorts Inc from buyout firm Blackstone Group LP for US$6.5 billion, would represent by far the biggest Chinese investment in US real-estate assets.
Chinese insurers are rushing to acquire high-yielding assets as they struggle to keep up with the policy liabilities of the nation’s aging population. US assets are also seen as a good hedge against any future weakness in the yuan.
Photo: AFP
China Insurance Regulatory Commission Chairman Xiang Junbo (項俊波) wrote in January in a magazine published by the nation’s central bank that Chinese insurers should venture overseas for investments. However, these investments are not without hurdles.
Anbang’s US$2 billion acquisition of the iconic Waldorf Astoria Hotel in New York, which was completed last year, attracted scrutiny from the Committee on Foreign Investment in the US (CFIUS), which reviews deals over possible national security concerns. US President Barack Obama used to stay at that hotel when visiting UN headquarters in New York.
While there is no indication that a potential acquisition of Starwood by Anbang would raise concerns about potential espionage, experts said it was possible such a deal would also trigger a CFIUS review. One Starwood property, for example, the W Hotel in downtown Washington, overlooks the US Department of the Treasury. However, CFIUS issues with individual hotels could be remedied through divestments or other measures.
“Anything with a line of sight to a major US government entity or security facility has to be a questionable part of the transaction and needs to be assessed by CFIUS,” said Mike Wessel, a member of the congressional US-China Economic and Security Review Commission.
Anbang plans to keep Starwood’s corporate headquarters in the US and not implement any layoffs, a person familiar with the company’s plans said.
Marriott said it remained committed to its cash-and-stock deal with Starwood, which would create the world’s largest hotel chain with top brands including Sheraton, Ritz Carlton and the Autograph Collection.
Starwood said it received a waiver from Marriott that allows it to engage in discussions with Anbang’s consortium. The waiver expires on Friday.
Marriott’s deal, inked in November, currently values Starwood at US$67.22 per share, below Anbang’s US$76 per share offer. Starwood’s shares rose 7.78 percent to US$75.90 on Monday. Marriott shares were up 2.96 percent at US$70.93.
“Anbang’s non-binding offer places Starwood shareholders in the difficult position of choosing between Marriott’s bird-in-a-hand firm commitment and Anbang’s two-in-the-bush offer,” Nomura Securities analyst Harry Curtis wrote in a note to clients.
Marriott may slightly improve the terms of its offer and emerge as the winning bidder, Curtis said.
The Anbang-led consortium includes private equity firms J.C. Flowers & Co and Primavera Capital Group, a source close to the parties said. J.C. Flowers and Primavera did not immediately respond to requests for comment.
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