Marriott International (MAR) may be better off without Starwood Hotels (HOT), especially after analysts at Susquehanna said that they recommend the company's shares with or without a Starwood acquisition.
Susquehanna reiterated its Positive rating on the company, while raising its price target to $95 from $93. Susquehanna's rating does come with a caveat, however. The firm believes that any bid above $87 per share for Starwood would cease to be beneficial for the hotel chain.
Marriott shareholders may feel the same way, according to Action Alerts PLUS charitable trust senior analyst Scott Berman. "Shares of Marriott are underperforming the market today on the news, which seems to indicate that shareholders continue to dislike this merger. Some key investors had already been outspoken against the initial deal, so we can only imagine how they feel now that Marriott was willing to up the bid," Berman said last week.
If day-to-day stock movements are good indicators, then there is something to the idea that Marriott shareholders are not too keen on this deal. Monday, when Starwood announced that it had received an upgraded bid from Anbang for about $14 billion, Marriott shares gapped up nearly $3 from its closing price the previous session.
Also, Marriott reached its year-to-date high on March 18, the same day that Starwood first accepted Anbang's unsolicited bid. The stock then began falling after the company came back over the top and sweetened its original deal for the company.
Part of the consternation investors may feel about the deal comes from the fact that no one really knows just how deep Anbang's pockets are.
On Monday, the Wall Street Journal detailed how opaque the Chinese insurer is not only abroad, but at home in China. According to filings, Anbang attempted to acquire Starwood three times last year. Each time Starwood asked how it would pay for the acquisition, and Anbang withdrew its third bid in the middle of a meeting after being questioned about its finances.
Marriott said Monday that it remains committed to its current $13.6 billion offer, and senior Robert W. Baird analyst David Loeb told CNBC today that he doesn't see the company raising its bid again. "I just think Marriott is too disciplined to pay more than what they've already offered. If I was a Starwood shareholder, I would be asking for the maximum value and I would be asking for the maximum value now."
Last week, Marriott CEO Arne Sorenson admitted that the updated bid for Starwood was not as sweet as the original one signed in November. "We think our bid is about 15% higher than our last one. I would also acknowledge that the proposal we signed last night is not as good for us as the deal we signed and announced in November," Sorenson told CNBC. "The deal we signed in November in retrospect may have been too good a deal."
Obtaining Starwood and its acclaimed loyalty program would definitely be a coup for Marriott, but if the price is too high, the company may be better off all by itself.