Marriott International announced Monday it has struck a deal to purchase Starwood Hotels & Resorts Worldwide in a mostly stock sale worth about $12.2 billion.
As part of the deal, Marriott will receive Starwood’s hotel chains including well-known brands such as the W, Westin, Sheraton and St. Regis. The new hotel company is now the largest in the world, with more than 5,500 hotels and 1.1 million rooms worldwide, according to a joint press release.
During a conference call Monday morning, Marriott CEO Arne Sorenson said the deal is expected to result in about $200 million in cost savings, with some savings coming by uniting duplicative services, such as those for taking reservations and accounting, and other operational efficiencies.
Bruce Duncan, Starwood’s board chairman, said the company conducted a global review of its options, including remaining as a stand-alone company, before deciding the Marriott deal was best for its shareholders.
“Starwood is a strong company, with much envied brands, hotels and people, but there’s no question it can benefit from scale and efficiency,” Duncan said on the conference call. “Marriott gives us that opportunity.”
Adam Aron, Starwood’s interim CEO, said the merger will also provide new career opportunities for Starwood’s employees.
“Marriott has a business culture that drives results through consistent execution,” Aron said.
Starwood has been the subject of sales talks since April, when it announced it was looking to make a deal. Previously, InterContinental Hotels and Hyatt had both been rumored as possible buyers, but ultimately it was Marriott that came away with the company, according to The New York Times.
Marriott will remain at its Bethesda headquarters and Sorenson remains the president and CEO of the company as part of the sale.
“The driving force behind this transaction is growth,” Sorenson said in a statement. “This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace.”
Starwood shareholders are expected to receive $79 per share in total value in the deal, which amounts to $70 per share, plus a $2 cash consideration and approximately $7.80 a share based on the sale of Starwood’s time-share businesses that wasn’t included in the Marriott deal. The merger is expected to officially close in mid-2016.
