Starwood mystified by Anbang withdrawal: report

From left: Starwood’s Thomas Mangas, the W Hotel and Anbang’s Wu Xiaohui
From the New York website: Wu Xiaohui could have at least taken Thomas Mangas out for dinner: Anbang Insurance Group reportedly withdrew its $14 billion bid for Starwood Hotels & Resorts by email and without explanation Thursday. 
The move caught Starwood by surprise because Anbang had already moved the money to buy the hotel company out of China and agreed to pay a large termination fee should Chinese regulators block the deal, according to an anonymous source cited by Bloomberg.
“It’s quite a surprise that they withdrew the offer,” Sigrid Zialcita, managing director of Asia-Pacific research at Cushman & Wakefield, told the news site. “They bit off more than they can chew.”
Anbang, known for its opaque ownership and aggressive expansion over the past two years, launched a bidding war for Starwood with an unsolicited $13.2 billion offer two weeks ago. Marriott had agreed to buy the rival hotel company last year, but the deal hasn’t closed yet.
Starwood accepted Anbang’s offer, but last week Marriott responded with a new bid worth $13.6 billion. On Monday, Anbang again raised its offer, this time to $14 billion, before withdrawing its bid Thursday.  [Bloomberg] — Konrad Putzier

Source: The Real Deal Miami

Out with a bang: Anbang reportedly ends bid for Starwood

The W South Beach is one of Starwood’s South Florida hotels
From the New York website: Anbang Insurance Group is reportedly giving up on its bid to take over Starwood Hotels & Resorts. The move likely ends a two-week bidding war with Marriott International that grabbed headlines around the world.
The Wall Street Journal broke the news late Thursday afternoon.
The decision to end the deal comes a week after Chinese news site Caixin reported that China’s insurance regulator could reject a takeover, citing rules that limit insurance companies to invest no more than 15 percent of their assets abroad. The New York Times also recently questioned the deal’s feasibility, arguing that Starwood would have few options to enforce it.
Starwood has yet to confirm that Anbang is withdrawing its bid. The Wall Street Journal report cited unnamed sources close to the talks.
Anbang, known for its opaque ownership and aggressive expansion over the past two years, launched a bidding war for Starwood with an unsolicited $13.2 billion offer two weeks ago. Marriott had agreed to buy the rival hotel company last year, but the deal hasn’t closed yet.
Starwood accepted Anbang’s offer, but last week Marriott responded with a new bid worth $13.6 billion. On Monday, Anbang again raised its offer, this time to $14 billion, before withdrawing its bid Thursday.
Despite its Starwood ambitions falling through, Anbang won’t end March empty-handed. Earlier this month, the firm agreed to buy 16 U.S. hotels, including the Essex House on Central Park South, from Blackstone Group for $6.5 billion. Anbang already owns the Waldorf Astoria hotel, which it bought from Blackstone for $1.95 billion last year. — Konrad Putzier

Source: The Real Deal Miami

Starwood would face problems closing a deal with Anbang

From left: Starwood’s Thomas Mangas, the W Hotel and Anbang’s Wu Xiaohui
From the New York website: If Anbang Insurance Group wins its bidding war for Starwood Hotels & Resorts, the hospitality firm would still have a lot of work to do to ensure the deal closes. 
When financing or other issues arise, parties generally enforce purchase agreements through the courts, but there are myriad difficulties in suing a firm such Anbang – with most of its assets based in China – for the colossal $14 billion sum that Anbang has offered, the New York Times reported.
The rule of law is notoriously weak in China, and it’s not clear that a Chinese court would enforce a judgement against Anbang. But Starwood still has options.
Many companies doing business internationally – especially in other weak-rule-of-law countries such as Russia – have included contract provisions mandating binding arbitration to settle disputes, instead of the courts.
About 24 national governments around the world, including China’s, have signed on to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the New York Convention.
But still, it’s widely believed even this sort of decision doesn’t amount to a guarantee in the case of China, the Times reported. And even if Chinese courts went along, the process would likely take years, far longer than Starwood can afford.
Another avenue for Starwood is demanding that Anbang put up collateral. The problem is that Anbang’s combined assets outside of China – the largest of those being the Waldorf Astoria Hotel, which it bought for $1.95 billion in 2014, and the Strategic Hotels and Resorts portfolio it recently bought from Blackstone for $6.5 billion – don’t add up to the value of its $14 billion bid.
Starwood’s lawyers would likely seek a deposit or letter of credit as collateral, the Times reported. Anbang’s opaque ownership structure makes collecting deposits from shareholders unlikely, but the firms could follow the lead of Shuanghui International Holdings, who placed a $275 million termination fee in escrow when it bought Smithfield Foods in 2013, about 5 percent of the purchase price.
Starwood may seek a larger escrow deposit, largely composed of letters of credit and financing letters rather than cash.
There are also likely to be problems with regulatory permission and financing for the purchase, the Times reported.
All these factors suggest Marriott International’s $13.6 billion bid may be relatively more attractive than Anbang’s, despite being lower. [NYT] – Ariel Stulberg

Source: The Real Deal Miami