Marriott International has struck a $12.2 billion deal to acquire Starwood Hotels & Resorts Worldwide, creating the largest hotel company in the world.
The merger marries Starwood’s global lifestyle brands with Marriott’s luxury and select-service properties, along with its convention and resort brands, to create a more comprehensive portfolio. The deal will also see Marriott Rewards’ 54 million members join with the Starwood Preferred Guest program’s 21 million members.
The companies together operate or franchise more than 5,500 hotels around the world with approximately 1.1 million rooms. Starwood and Marriott’s combined lifestyle properties will make the company a leading international presence in that segment, with the deal expected to further accelerate growth in the category.
“The driving force behind this transaction is growth,” says Arne Sorenson, president and CEO of Marriott International, who will continue in his position following the merger. “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. This greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth, and enhance long-term value to shareholders.”
In the second year following the deal, Marriott will save an estimated $200 million annually by leveraging general, administrative, and operating efficiencies. The company will also realize increased efficiency and revenue opportunities by leveraging economies of scale—such as in reservations, procurement, shared services, and other areas—driving improved property-level profitability. Marriott earnings will additionally benefit from post-transaction asset sales and accelerated unit growth.
“Our board concluded that a combination with Marriott provides the greatest long-term value for our shareholders and the strongest and most certain path forward for our company,” says Bruce Duncan, Starwood’s chairman of the board of directors. “Starwood shareholders will benefit from ownership in one of the world’s most respected companies, with vast growth potential further enhanced by cost synergies.”
The acquisition’s one-time costs will total an estimated $100 to $150 million, though transition costs will most likely be incurred over the next two years, though they cannot be estimated at this time.
Three members of Starwood’s board of directors are expected to join with Marriott’s, increasing its board of directors from 11 to 14 members.
The transaction is expected to close in mid-2016. Marriott’s headquarters will remain in Bethesda, Maryland.
