Anbang Insurance Group was a surprise entrant when it emerged three weeks ago as the lead bidder for Starwood Hotels & Resorts Worldwide. Its decision to back out of the $14 billion takeover offer was just as unexpected.
Yet negotiations to buy Starwood were rocky even as they began last year, stumbling for the first time in November and leading the Chinese insurer to walk away, according to regulatory filings and a person with knowledge of the matter.
Anbang's move Thursday to pull out of the bidding for the owner of the Sheraton, W, St Regis and Westin brands ends the takeover battle, clearing the way for an acquisition by Marriott International. The Beijing-based insurer, which had partnered with JC Flowers & Co and Chinese private equity firm Primavera Capital, decided not to proceed because of "various market considerations," according to a statement.
Back in November, Anbang Chairman Wu Xiaohui rescinded a preliminary offer to acquire Starwood right in the middle of a meeting, after he was pressed to provide written details of the insurer's financing plans.
It wasn't until March that Wu and new partners came back to the negotiating table. After twice topping rival bids from Marriott, it looked like the target was almost in his grasp. Starwood had a draft merger agreement in place and was ready to make a deal, the company said in a regulatory filing Friday.
On March 29, Wu called Starwood Chief Executive Officer Tom Mangas and said the company was considering raising its price and needed "a couple of days" to finalise the plan.
Sudden end
Then, on the last day of March, Starwood's lawyers were informed of a sudden termination of the $14 billion Anbang offer, according to the filing. The Anbang consortium followed with a letter to Starwood executives using the same "market considerations" language as in its public statement later.
Anbang's abrupt withdrawal for the second time surprised the Starwood board and its advisers. This time around, Anbang's Wu had answered their concerns. Anbang had demonstrated that funding not only was in place, it was already out of China, according to people with knowledge of the talks. In addition, the Chinese insurer had committed to pay a significant termination fee should any regulatory opposition scupper the deal, the people said.
The withdrawn bid brought to an end one of the most high-profile bidding wars of 2016 and what would have been the largest Chinese acquisition of a US firm. It also marks a blow to the ambitions of Anbang's politically connected chairman, who has been notching up purchases from South Korea to the Netherlands.
"It's quite a surprise that they withdrew the offer," Sigrid Zialcita, managing director of Asia-Pacific research at Cushman & Wakefield in Singapore, said. "They bit off more than they can chew."
'Moved mountains'
A representative for Anbang said the company has no comment at this time. Carrie Bloom, a spokeswoman for Starwood, declined to comment. Starwood's Mangas said on a conference call Friday that Anbang "moved mountains" to persuade the board to consider its deal before ultimately walking away.
"They told us what they told the market," Mangas said of Anbang's withdrawal. "They make decisions quickly and they don't feel a need to have a big publicity around their decision-making process." Starwood shares fell 4.8 per cent to $79.44 at 1:32 p.m. New York time. Marriott dropped 5.5 per cent to $67.29.
Starwood put itself up for sale early last year after lagging behind larger competitors in expanding the number of properties carrying its brands. It was pursued by about a dozen companies, including Hyatt Hotels and other Chinese suitors, before Marriott swooped in.
The takeover battle underscored the scale of Chinese companies' global ambitions. Had Anbang won Starwood, it would have been the largest buyout of a US company by a Chinese investor, topping the 2013 purchase of Smithfield Foods for $7 billion including debt.
Anbang has been expanding into US hotels, bursting onto the scene with its $1.95 billion acquisition of the Waldorf. The insurer has also agreed to a $6.5 billion purchase of Strategic Hotels & Resorts, an owner of US luxury properties including New York's JW Marriott Essex House, from Blackstone Group LP. That deal is proceeding as planned, said people with knowledge of the matter.
