China's Anbang challenges Marriott with $13 billion Starwood offer

Mon Mar 14, 2016 4:10pm EDT
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By Mike Stone and Diane Bartz

(Reuters) - China's Anbang Insurance Group Co has challenged Marriott International Inc's (MAR.O: Quote) merger with U.S. hotel operator Starwood with a $12.8 billion cash offer, burnishing its credentials as one of China's top corporate acquirers.

The non-binding bid, unveiled on Monday, just days after Anbang agreed to acquire Strategic Hotels & Resorts Inc from buyout firm Blackstone Group LP (BX.N: Quote) for $6.5 billion, would represent by far the biggest Chinese investment in U.S. real estate assets.

Chinese insurers are rushing to acquire high-yielding assets as they struggle to keep up with the policy liabilities of the country's aging population. U.S. assets are also seen as a good hedge against any future weakness in the yuan.

The head of China's insurance regulator, Xiang Junbo, wrote in January in a magazine published by the country's central bank that Chinese insurers should venture overseas for investments. These investments, however, are not without hurdles.

Anbang's $2 billion acquisition of the iconic Waldorf Astoria Hotel in New York, which was completed last year, attracted scrutiny from the Committee on Foreign Investment in the United States (CFIUS), which reviews deals over possible national security concerns. U.S. President Barack Obama used to stay at that hotel when visiting United Nations headquarters in New York.

While there is no indication that a potential acquisition of Starwood by Anbang would raise concerns about potential espionage, experts said it was possible such a deal would also trigger a CFIUS review. One Starwood property for example, the W Hotel in downtown Washington, D.C. overlooks the U.S. Treasury. However, CFIUS issues with individual hotels could be remedied through divestments or other measures.

"Anything with a line of sight to a major U.S. government entity or security facility has to be a questionable part of the transaction and needs to be assessed by CFIUS," said Mike Wessel, a member of the congressional U.S.-China Economic and Security Review Commission.

Anbang plans to keep Starwood's corporate headquarters in the U.S. and not implement any layoffs, according to a person familiar with the company's plans.   Continued...

London buses pass 'Le Meridien Piccadilly' hotel, owned by Starwood Hotels, in Leicester Square in central London March 4, 2014. REUTERS/Toby Melville