Starwood Hotels & Resorts Worldwide has just announced that its board of directors and Marriott International Inc’s board of directors have unanimously approved a definitive merger agreement making them the world’s largest hotel company.
The combined company’s pro forma fee revenue for the 12 months ended September 30 2015 totals over US$2.7 billion.
The combined company will have 1.1 million rooms in more than 5,500 hotels with over 30 brands in over 100 countries.
Starwood shareholders will receive 0.92 shares of Marriott International, Inc Class A common stock and US$2 in cash for each share of Starwood common stock.
On a pro forma basis, Starwood shareholders would own approximately 37% of the combined company’s common stock after completion of the merger using fully diluted share counts as of September 30, 2015. Total consideration to be paid by Marriott totals $12.2 billion consisting of $11.9 billion of Marriott International stock, based on the 20-day VWAP (volume weighted average price) of Marriott stock ending on November 13, 2015, and $340 million of cash, based on approximately 170 million fully diluted Starwood shares outstanding at September 30, 2015. Based on Marriott’s 20-day VWAP ending November 13, 2015, the merger transaction has a current value of $72.08 per Starwood share, including the $2 cash per share consideration. 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, based on the 20-day VWAP of Interval Leisure Group stock ending November 13, 2015. The timeshare transaction should close prior to the Marriott-Starwood merger closing.
Marriott expects to deliver at least US$200 million in annual cost savings in the second year after closing through leveraging operating and G&A efficiencies. Marriott expects the transaction to be earning accretive by the second year after the merger, not including the impact of transaction and transaction costs. Earnings will benefit from post-transaction asset sales, increased efficiencies and accelerated unit growth.
Marriott expects Starwood to continue its capital recycling program, generating an estimated $1.5 to $2.0 billion of after-tax proceeds from the sale of owned hotels over the next two years. The hotels are expected to be sold subject to long-term operating agreements.
Today, Marriott Rewards, with 54 million members, and Starwood Preferred Guest, with 21 million members, are among the industry’s most-awarded loyalty programs, driving significant repeat business. They should be even stronger when the companies merge.
[update 18 November 2015 – Marriott Rewards Email Update]
Dear Adrian,
As a valued member, we’re excited to share the news that Marriott International will join together with Starwood Hotels & Resorts to create the world’s largest hotel company. For our Marriott Rewards members, this will mean even more choices in even more places, giving you access to 1.1 million rooms across 5,500 hotels in more than 100 countries.
Marriott Rewards and Starwood Preferred Guest (SPG) are among the industry’s most-awarded loyalty programs, and they should be even stronger when the companies merge. Our programs and brands complement each other well, and we intend to draw upon the best of both programs to provide more value for our guests and hotels.
This is the start of a long journey as we combine our two companies. For now, we remain separate, and there is no change to your Marriott Rewards program status, your Rewards points or your existing reservations. You will continue to earn Rewards points and elite stay/night credit for your stays, and bonus points for any promotions in which are you are participating. There is no change to how you manage your Rewards account or book reservations.
Over the coming months, as we have more to share we’ll be sure to reach out to you by e-mail, atmarriottrewards.com and via twitter (@MarriottRewards). In the meantime, we remain at your service wherever you need us—whether in our hotels, at marriottrewards.com, the Marriott mobile app, or via our Customer Care Centers.
All my best,
Arne Sorenson
President and Chief Executive Officer
Marriott International, Inc
