The surprise move by Anbang Insurance Group to end its $14 billion bid to purchase world luxury hotels puts to a halt a bid war with Marriott International Inc. that has been ongoing for three weeks. This move could put a dent on the increase in the number of Chinese companies making deals abroad.
Anbang Ends $14bn Bid War With Marriot over Starwood HotelsIn a statement, Anbang and private equity companies Primavera Capital Group and J.C. Flowers & Co. said they had made the decision to retract their bid On Starwood as a result of various market factors that were not elaborated.
The unforeseen retraction has effectively ended an acrimonious bidding war that indicates the emerging influence of Chinese firms in the sector of high value acquisitions and mergers. But questions also arise on their capacity to close such high stakes deals.
This year only, Chinese companies have announced foreign acquisitions worth up to $92 billion, a growth rate that surpasses that of previous years.
In spite of the headways made by Chinese firms, U.S. regulators have the final say on any of the deals, and a lot of opposition has been emerging from Washington.
Anbang’s abandonment of the Starwood deal could send the wrong picture to U.S. companies who may view their Chinese counterparts as not being ready for high stakes mergers and acquisitions.
A China-based insurance company, Anbang was founded in 2004 but lacks a clear ownership structure, according to reports by the Wall Street Journal. Various insurance analysts have indicated that the company’s balance sheet does not support the spending on recent acquisitions, with one of the most expensive being the Manhattan-based Waldorf Astoria hotel that was purchased for $2 billion. It is also not clear that Chines authorities approve of Anbang’s acquisitions.
Following the announcement, Starwood stock dropped by 4.5% in the afterhours, closing at the $83.43 in New York. Had Anbang succeeded in its bid, the Starwood takeover would have been the biggest buyout of a US company by a Chinese firm.