Marriott International and Starwood Hotels & Resorts Worldwide to merge in transaction valued at $12bn

MarriottTimeshareResort

The boards of directors of hotel companies Marriott International Inc (NASDAQ: MAR) and Starwood Hotels & Resorts Worldwide Inc (NYSE: HOT) have unanimously approved a definitive merger agreement, the companies announced on Monday.

This merger agreement will see the creation of the world’s largest hotel company, which will offer 1.1 million rooms in more than 5,500 hotels around the world. The transaction is expected to close in mid-2016, subject shareholder approvals, the completion of Starwood’s planned disposition of its timeshare business, regulatory approvals and the satisfaction of other customary closing conditions.

Under the terms of the agreement, Starwood shareholders will receive 0.92 shares of Marriott International Class A common stock and $2.00 in cash for each share of Starwood common stock, at closing. Following completion of the merger, Starwood shareholders would own approximately 37% of the combined company’s common stock, on a pro forma basis, using fully diluted share counts as of 30 September 2015.

Marriott will pay a total consideration of $12.2bn for Starwood, which will consist of $11.9bn of Marriott International stock, based on the 20-day VWAP (volume weighted average price) of Marriott stock ending on 13 November 2015, and $340m in cash, based on approximately 170 million fully diluted Starwood shares outstanding at 30 September 2015. Based on Marriott’s 20-day VWAP ending 13 November 2015, the merger transaction has a current value of $72.08 per Starwood share, which includes the $2 cash per share consideration.

Separately, Starwood shareholders will receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with Interval Leisure Group, which has an estimated value of approximately $1.3bn to Starwood shareholders, or around $7.80 per Starwood share. This is also based on the 20-day VWAP of Interval Leisure Group stock ending 13 November 2015. The timeshare transaction is expected to close before the closing of the Marriott-Starwood merger.

On completion of the transaction, Starwood’s lifestyle brands and international footprint will combine with Marriott’s strong presence in the luxury and select-service tiers, as well as the convention and resort segment. The merged hotel company is expected to offer broader choice for guests and greater opportunities for associates. The companies also anticipate that additional value for Marriott and Starwood shareholders will be unlocked as a result of the merger. 

At least $200m in annual cost savings are expected by Marriott in the second full year after closing, which it said will be achieved by leveraging operating and G&A efficiencies. Marriott also expects the transaction to be earnings accretive by the second year after the merger, not including the impact of transaction and transition costs.

President and chief executive officer of Marriott International, Arne Sorenson, commented: “The driving force behind this transaction is growth. 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. Today is the start of an incredible journey for our two companies. We expect to benefit from the best talent from both companies as we position ourselves for the future. I know we’ll do great things together as The World’s Favorite Travel Company.”

Following the merger, Sorenson will remain as president and chief executive officer of Marriott International and the company’s board of directors will increase from 11 to 14 members with the expected addition of three members of the Starwood Board of Directors.

Lazard and Citigroup are serving as financial advisors to Starwood Hotels & Resorts Worldwide and its legal counsel is Cravath, Swaine & Moore. 

Deutsche Bank Securities is the financial advisor to Marriott International and Gibson, Dunn & Crutcher is its legal counsel.

How businesses can learn promotional strategies from tourist boards

Companies are constantly looking for new ways to improve image and will often employ a wide range of different marketing strategies at any one time to keep things fresh. Email marketing and direct mail are two of the most common methods that can be used to entice new and keep current customers. However, there is no hard and fast way to go about painting your brand in a positive light and firms can often learn as much from other companies and rivals as they can glean from their own marketing efforts.

Tourist boards are brilliant at depicting the location they are promoting as a perfect holiday destination, and some of their tactics can be mirrored in any form of business. They can paint a picture of the area’s best features, which in turn brings in revenue, so why not try to use some of the same approaches?

Don’t be afraid to experiment

Tourist boards have never been afraid to experiment in other countries in order to gain as much exposure as possible. For instance, last November, the agency Curb Media worked on behalf of the Swiss tourist board to install large blocks of ice around London to promote winter tourism in the Central European country.

Ice blocks were put in busy places such as Canary Wharf, Broadgate’s Fulcrum sculpture, Westfield Shopping Centre and St Pancras Station. Each one depicted Swiss glaciers and represented one of the five ski regions of the country. In addition, there were 75 Swiss flag cards surrounding each block and anyone that freed a card from the melting ice had an opportunity to win a winter holiday to Switzerland.

Get your brand message right

Whatever types of marketing method you use, it is the message that you must get absolutely spot on if you are to get people onside. This means that companies – just as tourist boards do – need to promote the most important details of the services the company provides and what they can expect from you. Tourist boards aim to show off the different activities that visitors can take part in while on holiday in that country, and so firms should show the services that they would provide to any potential customer. You should be attempting to provide an image of the products and services that help to make you an industry leader in your sector.

Companies should brainstorm the different things that help to make their services stand out against their rivals and show these off in marketing communications.

Highlight your best features

Some tourist boards will have millions to spend every year on marketing methods to paint their area in a positive light. Think about how much money it would cost Visit California for their recurring TV adverts that feature scores of big-name celebrities telling viewers about the joys of a holiday in the US state. Indeed, people such as Rob Lowe and former governor Arnold Schwarzenegger have appeared in the adverts.

While your company may not have the budget that Visit California does, it is vitally important that you highlight the features that make your brand great. In marketing communications, paint a portrait of your firm in the best possible light. Companies can also paint their products in a positive light by offering out promotional items such as polo shirts. 4imprint has a wide range such items to choose from.

Study looks at dangers of airport secondhand smoke

Average air pollution levels from secondhand smoke directly outside designated smoking areas in airports are five times higher than levels in smoke-free airports, according to a study by the US-based Centers for Disease Control and Prevention.

The CDC said that the study was conducted in five large hub U.S. airports. It also showed that air pollution levels inside designated smoking areas were 23 times higher than levels in smoke-free airports. In the study, designated smoking areas in airports included restaurants, bars, and ventilated smoking rooms.

Five of the 29 largest airports in the United States allow smoking in designated areas that are accessible to the public.

The airports that allow smoking include Hartsfield-Jackson Atlanta International Airport, Washington Dulles International Airport, McCarran International Airport in Las Vegas, Denver International Airport, and Salt Lake CityInternational Airport. More than 110m passenger boardings–about 15 % of all U.S. air travel–occurred at these five airports last year.

A 2006 Surgeon General’s Report concluded that there is no risk-free level of exposure to secondhand smoke.

Although smoking was banned on all U.S. domestic and international commercial airline flights through a series of federal laws adopted from 1987 to 2000, no federal policy requires airports to be smoke-free.

For an online version of this MMWR report, visit www.cdc.gov/mmwr