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Marriot Acquiring Starwood Hotels to Create Largest Hotel Chain

On Monday, Marriott International announced that it would acquire Starwood Hotels and Resorts Worldwide for a price of $12.2 billion. The deal includes both cash and stock and will create the world’s biggest hotel chain.

Under the deal’s terms, Marriott is to pay $72.08 per share in cash and stock for the hotel chain, whose brands include St. Regis, Sheraton, the W and Westin.

The deal solves a big question mark, which has been hanging over the Starwood brand for close to a year.

The company’s stock has underperformed and its CEO and president Frits van Paasschen stepped down and was replaced by a director Adam Aron, on just an interim basis,

In April, Starwood announced it was working on different strategic alternatives of which one included a possible sale.

Since that time, there has been speculation building about which one of the world’s big hoteliers could possibly buy the chain.

This past July, Intercontinental Hotels Group had been reportedly in talks to buy Starwood, but the rumors were rejected quickly by Intercontinental.

Just last month, Hyatt was said to be preparing a bid of cash and stock to acquire Starwood, said people with knowledge of those negotiations.

The combined new company of Marriott and Starwood will have over 5,500 hotels that are either owned or are franchised with an incredible 1.1 million rooms across the globe.

The prices of stock for both companies were down in early morning trading Monday. This deal represents a premium of over 6% beyond an average of where the stock of Starwood has been trading over the 20 days prior to November 13.

The premium is 19% using the same time through October 26, when the most recent speculation of a takeover started.

Of the deal for $12.2 billion, $11.9 billion is to be paid in stock with the difference in cash.

This means cash used to complete the deal will represent just 2.8% of the complete sale price, which is the seventh lowest on record for a deal of cash and stock that is more than $10 billion, according to an online research firm.

Both boards of directors have approved the sale and the deal will need approval from both regulators and shareholders before it can be finalized.

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