Starwood Hotels & Resorts Worldwide, Inc.
Robbins Arroyo LLP: Acquisition of Starwood Hotels & Resorts Worldwide, Inc. (HOT) by Marriott International Inc. (MAR) May Not Be in Shareholders’ Best Interests
Robbins Arroyo LLP is investigating the proposed acquisition of Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) by Marriott International Inc. (NASDAQ: MAR). On November 16, 2015, the two companies announced the signing of a definitive merger agreement pursuant to which Marriott will acquire Starwood. Under the terms of the agreement, Starwood shareholders will receive $2.00 in cash and 0.92 Marriott shares for each share of Starwood common stock they own. Starwood shareholders will separately receive $7.80 in cash consideration from the spin-off of the Starwood timeshare business and subsequent merger with Interval Leisure Group. The total the value of the consideration is equal to $79.88 for each share of Starwood common stock.
Is the Proposed Acquisition Best for Starwood and Its Shareholders?
Robbins Arroyo LLP’s investigation focuses on whether the board of directors at Starwood is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $79.88 merger consideration represents a premium of only 16.5% based on Starwood’s closing price on October 26, 2015, the last day prior to the acquisition rumors. This premium is significantly below the average one day premium of nearly 42.4% for comparable transactions within the past three years. Further, the $79.88 merger consideration is significantly below the target prices set by ten analysts, prior to the acquisition rumors, including the target price of $98.00 set by an analyst at Argus Research Corp on May 5, 2015, and $93.00 set by an analyst at Nomura on October 26, 2015. In the last three years, Starwood traded as high as $87.99 on April 29, 2015, and most recently traded above the merger consideration – at $80.08 – on August 3, 2015.
On October 28, 2015, Starwood reported strong earnings results for its third quarter 2015. Management fees, franchise fees, and other income increased 3.1% compared to 2014. Core fees increased 1.9% compared to 2014. Earnings from Starwood’s vacation ownership and residential business increased approximately $8 million compared to 2014. Starwood beat consensus analyst estimates for adjusted EPS and adjusted net income in the last four quarters and beat consensus analyst estimates for sales in three out of the last four quarters. In commenting on these results, Starwood interim Chief Executive Officer Adam Aron remarked, “As we expected, the results for the completed third quarter were encouraging. Our performance is yet another indication that Starwood has been making progress on the sharply-focused strategy we launched in February 2015 to strengthen our brands, drive operational excellence, and accelerate the pace of our growth. Collectively these efforts have also yielded better growth in our new hotel signings, with rooms up 33% year-to-date through the end of the third quarter. These results on both operations and development give us optimism to have a bullish outlook for 2016 as well as the future of our brands and hotels.”
In light of these facts, Robbins Arroyo LLP is examining Starwood’s board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
Starwood shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
Starwood shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.