THE BULLETIN
The mega-deal is back
I
t ’ s been seven years since Marriott International acquired Starwood Hotels & Resorts for just north of $ 13 billion . It ’ s been 25 years since Starwood Hotels & Resorts acquired ITT Corporation for just shy of $ 15 billion . I covered the former , not the latter , but am equally drawn by the spectacle that is the mega-deal . And we haven ’ t had a good one for a while ; until now . And what a good one it is shaping up to be .
Set the scene : For months there has been chatter and speculation surrounding Choice Hotels buying Wyndham Hotels & Resorts . In May , The Wall Street Journal published a story that all but confirmed it was true , though no one from either company was on the record as saying so . It was , instead , “ people familiar with the matter ,” which was either a rogue employee or , more likely , a high-level executive for Choice , setting the stage .
Five months later , it ’ s all out in public , for everyone to discuss and opine on . Choice , this time formally for all to see , came out into the light with its bid for Wyndham and , moreover , accused the company of negotiating in bad faith . “ A few weeks ago , Choice and Wyndham were in a negotiable range on price and consideration ,” said Choice Hotels President & CEO Pat Pacious . “ We were therefore surprised and disappointed that Wyndham decided to disengage .”
Wyndham chirped back : “ While our board would support a value-maximizing transaction , given the substantial , unmitigated embedded risks and value destruction potential presented by the proposed transaction , our board determined it is not in the best interests of Wyndham shareholders ,” said Stephen Holmes , chairman of the Wyndham Board of Directors . Spicy . It could also be posturing . What most mega-deals have in common is that the first price offered is never the final price paid . Consider the Marriott / Starwood timeline and the other horse in the saga , Anbang , the Chinese insurer that seemingly tried to buy anything hospitality related 10 years ago and still owns the Waldorf Astoria New York . After Starwood initially announced its agreement with Marriott for $ 12.2 billion in November 2015 , Starwood turned around and accepted a $ 13 billion offer from Anbang in March 2016 , causing Marriott to increase its offer to $ 13.6 billion . A week later , Anbang countered back at $ 14 billion , but withdrew three days later , leaving Marriott the vanquisher , at the $ 13.6 billion mark , $ 1.4 billion more than the original offer .
Choice has reportedly been engaged in talks with Wyndham for six months now with an initial offer of $ 80 per share , comprising 40 % cash and 60 % Choice stock . Wyndham balked . Choice came back at $ 85 per share , 55 % cash , 45 % Choice stock . Wyndham rejected . Choice upped it to where it stands now —$ 90 per share , again a mix of cash and stock , which values Wyndham at approximately $ 7.8 billion . Wyndham still decided to walk away — for now — saying “ the offer substantially undervalues Wyndham relative to its future growth prospects ” and sighting other variables such as regulatory hurdles and that a large component of the deal is stock .
The back-and-forth between companies might sound antagonistic , but as Michael Corleone said in “ The Godfather ”: “ It ’ s not personal ; it ’ s strictly business .”
By the time you read this column , the deal may have happened ; it may still be lingering ; or it may be off . I don ’ t have a horse in the race , but as one industry friend , who worked for both Choice and Wyndham , told me : “ Having great admiration for the executives at both organizations , I will say that Stewart Bainum [ chairman of Choice ; his father was the founder ] almost always gets what he wants . Maybe not today , maybe not tomorrow , but most of the time if he wants something , he eventually gets it .”
Starwood held a dear place in many a traveler ’ s heart and is now but a footnote in the history of hospitality , just like ITT Sheraton , the company it once subsumed . Because in the age of the mega-deal , it ’ s the eaten
David Eisen that is often forgotten .
Editor In Chief
8 hotelsmag . com Nov / Dec 2023