It’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. (Note: Choice seems to think it’s still on; Wyndham seems to think it’s off—for now.) 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 that is often forgotten.