What's going on?

You might remember back in November we reported that Starwood Hotels had agreed to be bought by Marriott. Well, the deal isn�t yet official and it looks like a group led by Chinese insurer Anbang is spoiling the party by bidding a higher price for Starwood Hotels.

 

What does this mean?

It�s useful to understand how mergers and acquisitions work. Usually, the Board of Directors of the involved companies agree to a deal (as was the case between Starwood and Marriott in November). The deal then must be approved by both companies� shareholders (e.g. big investment funds). In Starwood�s case, its shareholders were due to vote on the proposed deal with Marriott in a few weeks time. But now, of course, there�s a new buyer to consider � and the Anbang-led group is paying a lot more than Marriott.

Why should I care?

For Starwood�s stock: Starwood must consider Anbang�s cash offer. The original deal with Marriott was mainly a share-based acquisition, which means that Starwood�s shareholders would end up owning shares in the new, combined company. The Anbang bid is simply in cash, which is usually preferable as it gives investors an immediate, guaranteed return. It�s likely Marriott would at least have to match (and would likely have to exceed) Anbang�s bid to compete. On Monday, Starwood�s stock jumped almost 10% as a result of the news.

The bigger picture: It�s another acquisition by a Chinese company. ChemChina bought Syngenta, Haier bought GE Electric and Dalian Wanda bought the film studio behind Jurassic Park. There have also been a number of smaller deals. It�s not totally clear why the sudden surge, but the rationale appears at least partly economic. It might be part of a view that, with China�s economy slowing, international companies offer a more attractive investment for Chinese firms.