Susquehanna: Buy Marriott, With Or Without Starwood

Susquehanna’s Rachael Rothman maintained a Positive rating for Marriott International Inc MAR, with a price target of $86, saying that the company would be in a strong position with or without the acquisition of Starwood Hotels & Resorts Worldwide Inc HOT.

Analyst Rachael Rothman maintained a Neutral rating for Starwood, while raising the price target from $93 to $95, after the company received a revised bid from Anbang.

Impact Of Anbag’s Revised Bid

Anbang has raised its bid for Starwood to $82.75 [ex. IILG], and the offer is now higher than Marriott’s offer by 6 percent. Continued bidding by Anbang indicates that they are not price sensitive. Rothman believes that Marriot can pay a maximum of $87 per share [ex. IILG], but is unlikely to be willing to pay even that much.

Time horizon remains a key consideration for investors in such a case. If they are willing to wait for 12 months for some of the synergies from Marriott’s buyout, there would be upside to Starwood’s shares of a total value of $103, which is 16 percent higher than Anbang’s current bid, the analyst noted.

He added, however, that in case investors had a shorter-term focus, “they may hold out for a slightly higher price, but will ultimately vote in favor of an all-cash Anbang bid.”

Marriot reaffirmed its commitment to acquire Starwood, saying the transaction offered its shareholders significant upside and greater long-term value, given scale and revenue and cost synergies of the merged entity.

Rothman believes that there is a 50 percent chance of Anbang’s revised offer being accepted, a 35 percent chance of Marriot matching Anbang’s offer and a 15 percent chance of Marriot offering $87.