In November 2015, Marriott International Inc. (MAR) signed a definitive merger agreement to acquire Starwood Hotels and Resorts Worldwide (HOT). The $13.6 billion acquisition will create the world’s largest hotel company. (For more, see: Marriott and Starwood's Billion Dollar Hotel Bid.)

With both firms operating globally, approvals from local authorities in their respective countries of operation is mandatory for the deal. While antitrust regulators in the U.S., EU, Canada and other regions have given a go-ahead for the acquisition, the recent approvals received from Mexican, and Saudi Arabian authorities allow the merger to progress through. The last approval from Chinese regulators is pending, which is expected to be received in near future. The merger deal will be executed soon after.

The Shareholder’s Gain

Under the proposed deal, shareowners of Starwood will get 0.8 shares of Marriott and a cash incentive of $21 for each Starwood share. The share prices are already reflecting the benefits, as Marriott shares are trading at $69.89 as of Friday morning.

In May, Starwood spun off its timeshare business called Vistana Signature Experiences. Previously known as Starwood Vacation Ownership, Vistana Signature Experiences was acquired by Interval Leisure Group Inc (IILG). To account for the spin-off, Starwood shareholders will receive special consideration. It is expected that one share of Vistana IILG would be allocated for each share of Starwood. However, details are expected to be confirmed shortly.

With the bulk of hotel booking moving online, the hotel companies are becoming more dependent on travel agencies like Booking.com, Expedia (EXPE) and TripAdvisor (TRIP), who take away a significant share in commissions. The hotel companies are also facing tough competition from alternative accommodations, like Airbnb. Large sized consolidations to create behemoths will facilitate better bargaining power to the hotel companies with the agents, and improve on profit margins. A large sized single entity will be better equipped to ward off competition more effectively.

The merged entity of Marriott and Starwood would create the largest hotel company in the world. It will have 30 hotel brands under its umbrella with 5,700 hotels holding more than 1.1 million rooms spread across the globe. 

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