Starwood Notifies Marriott of Intention to Terminate Merger Agreement

[For update see: Marriott / Starwood Merger Back on Track]. Starwood Hotels & Resorts’ Board of Directors, in consultation with its legal and financial advisors, has determined that the revised binding and fully financed proposal from a consortium consisting of Anbang Insurance Group Co., Ltd., J.C. Flowers & Co. and Primavera Capital Limited, constitutes a “Superior Proposal”, as defined in Starwood’s merger agreement with Marriott International.

Under the terms of the consortium’s proposal, which contains definitive documentation, the consortium would acquire all of the outstanding shares of common stock of Starwood for $78.00 per share in cash, an increase from the $76.00 per share proposal made by the consortium on 10 March 2016.

Pursuant to separate agreements entered into by Starwood, Starwood stockholders would additionally receive consideration in the form of Interval Leisure Group (ILG) common stock from the previously announced spin-off of its vacation ownership business, Vistana Signature Experiences, and subsequent merger with ILG, currently valued at approximately $5.67 per Starwood share, based on the 20-day VWAP (volume weighted average price) of ILG common stock ending 17 March 2016. On this basis, the consortium proposal and the ILG transaction have a current value of $83.67 per share.

Under the terms of the merger agreement with Marriott, Starwood stockholders would receive 0.92 shares of Marriott International, Inc. Class A common stock and $2.00 in cash for each share of Starwood common stock. Based on Marriott’s 20-day VWAP ending 17 March 2016, the merger transaction has a current value of $65.33 per Starwood share, including the $2.00 cash per share consideration. Starwood stockholders will separately receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with ILG of approximately $5.67 per Starwood share, based on the 20-day VWAP of ILG common stock ending 17 March 2016. On that basis, the merger with Marriott and the ILG transaction have a current value of $71.00 per share.

On 18 March 2016, Starwood notified Marriott that Starwood had received the binding proposal from the consortium that Starwood’s Board has determined that the consortium’s proposal constitutes a “Superior Proposal” and that Starwood’s Board intends to terminate the Marriott merger agreement and enter into a definitive agreement with the consortium.

Consistent with the terms of the Marriott merger agreement, Marriott has the right until 23:59 ET on 28 March 2016 to negotiate revisions to the existing merger agreement between Marriott and Starwood so that the proposal from the consortium no longer constitutes a “Superior Proposal”.

Starwood says it will negotiate in good faith with Marriott during this period, and the Starwood Board will consider in good faith any changes to the Marriott agreement that Marriott may propose during this period.

Starwood is not permitted to terminate the Marriott agreement to enter into the consortium’s binding agreement unless the Starwood Board has determined that the consortium’s offer continues to be a “Superior Proposal” once the negotiation period with Marriott has concluded, and taking into account any revisions to the existing Marriott agreement that are proposed by Marriott during this period. The consortium has confirmed that its offer will remain outstanding until the expiration of Marriott’s negotiation period.

In light of these developments and the resulting need for Starwood to be able to provide sufficient time for the filing or mailing of additional information regarding these developments to its stockholders, Starwood has postponed its Special Meeting of Stockholders, which was scheduled to be held on 28 March 2016, to a date that we will establish after consultation with Marriott. Starwood’s Board has not changed its recommendation in support of Starwood’s merger with Marriott.

Lazard and Citigroup are serving as financial advisors and Cravath, Swaine & Moore LLP is serving as legal counsel to Starwood.

[For update see: Marriott / Starwood Merger Back on Track]

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