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 The surprise withdrawal marks an anticlimactic end to a bidding
war that had pitted Marriott's ambitions to create the world's
largest lodging company, with about 5,700 hotels, against Anbang's
drive to create a vast portfolio of U.S. real estate assets.
It also represents a blow to corporate China's growing ambitions to
acquire U.S. assets. Anbang's acquisition of Starwood would have
been the largest takeover of a U.S. company by a Chinese buyer.
"We were attracted to the opportunity presented by Starwood because
of its high-quality, leading global hotel brands, which met many of
our acquisition criteria, including the ability to generate
consistent, long-term returns over time," Anbang said in a
statement.
"However, due to various market considerations, the consortium has
determined not to proceed further," Anbang added, referring to the
joint bid it had put together with private equity firms J.C. Flowers
& Co and Primavera Capital Ltd.
 Anbang did not offer Starwood a reason for not following through on
its raised offer of March 26, according to people familiar with the
matter. They asked not to be identified disclosing confidential
discussions.
"The reason of withdrawal is simple - Anbang isn't interested in a
protracted bidding war," Fred Hu, chairman of Primavera, told
Reuters in an email.
It was not immediately clear if Marriott had been planning a
counterbid to Anbang's March 26 offer. Anbang has previously bowed
out of smaller deals, but this is the most high-profile deal it has
abandoned, people familiar with the matter said.
Starwood said on Monday that Anbang had raised its offer to almost
$14 billion. Anbang had been expected to firm up that non-binding
offer, so that Starwood would formally declare it superior to
Marriott's.
Anbang had already made a $13.2 billion binding and fully financed
offer earlier this month, which Starwood accepted as superior. Had
Marriott not counterbid on March 21, Starwood would have proceeded
with the earlier Anbang offer.
Starwood said on Thursday that Anbang had withdrawn its offer "as a
result of market considerations," which it did not specify. Marriott
declined to provide immediate comment.
The move fueled speculation on what drove Anbang to change course,
especially given that many Chinese overseas acquisitions have been
encouraged by the country's authorities.
Chinese financial magazine Caixin reported earlier this month that
China's insurance regulator would likely reject a bid by Anbang to
buy Starwood, since it would put the insurer's offshore assets above
a 15 percent threshold for overseas investments.
Should Anbang have clinched an agreement with Starwood, it would
have been scrutinized by the Committee on Foreign Investment in the
United States (CFIUS), an interagency panel that reviews deals to
ensure they do not harm national security. However, sources had said
that both Starwood and Anbang believed the deal would have received
CFIUS clearance.
"My guess is that Starwood wanted either a higher break-up fee,
maybe a billion dollars, or a higher price from Anbang to offset the
risk," said Ryan Meliker, an analyst at Canaccord Genuity Group Inc
<CF.TO>.
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In its latest offer, Anbang's consortium had offered $82.75 per
share in cash. Marriott's latest cash-and-stock offer, which was
announced on March 21, is worth around $75 per share.
Starwood shareholders will also receive stock in Interval Leisure
Group Inc <IILG.O>, worth $6.13 per Starwood share. This is the
result of a deal last year to spin off Starwood's timeshare business
and combine it with Interval Leisure Group.
Starwood's shares fell 4.4 percent to $79.80 in extended trading,
while Marriott shares fell 4.9 percent to $67.68. This indicates
that some Marriott shareholders are disappointed that the company is
moving ahead with the deal at such a high price.
GLOBAL SHOPPING SPREE
Anbang was established in 2004 as an automotive and property insurer
by Chairman Wu Xiaohui, a native of China's entrepreneurial coastal
city Wenzhou. The company has been leveraging its 1.65 trillion yuan
($253 billion) in assets to transform into a worldwide investor.
Anbang's major deals include last year's $1.95 billion purchase of
Waldorf Astoria Hotel in New York and this month's agreement to buy
Strategic Hotels & Resorts Inc, from Blackstone Group LP <BX.N> for
$6.5 billion. Anbang's purchase of U.S. insurer Fidelity & Guaranty
Life <FGL.N> for $1.6 billion is awaiting regulatory approval.
Marriott said last week it believed it could achieve $250 million in
annual cost synergies within two years after closing the deal with
Starwood, up from $200 million estimated in November 2015 when it
signed its original merger agreement.
Starwood and Marriott shareholders are separately scheduled to vote
on the deal on April 8.
Lazard Ltd <LAZ.N> and Citigroup Global Markets Inc <C.N> are
financial advisers to Starwood. Cravath, Swaine & Moore LLP is its
legal counsel. Deutsche Bank <DBKGn.DE> and Gibson, Dunn & Crutcher
are advising Marriott.
PJT Partners Inc <PJT.N> is Anbang's financial adviser, while
Skadden, Arps, Slate, Meagher & Flom LLP is its legal counsel.
(Reporting by Greg Roumeliotis in New York and Matthew Miller in
Beijing; Addtional reporting by Mike Stone in New York, Ramkumar
Iyer in Bengaluru and Denny Thomas in Hong Kong; Editing by Kirti
Pandey, Richard Chang and Edwina Gibbs)
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