When Marriott International’s $12.2 billion bid for Starwood Hotels and Resorts Worldwide was announced on Monday morning, investors and analysts were surprised. It was not the sale itself — Starwood, whose brands include Westin, W and Sheraton, had effectively put itself up for sale in late April — but that the buyer was Marriott.Of all the rumored suitors — Hyatt Hotels Corporation, InterContinental Hotels Group and a few Chinese companies — Marriott had not been seen as being in the mix. On Marriott’s earnings call on April 30, the company’s chief executive, Arne Sorenson, waved off a question about a combination, saying it was inconsistent with its previous acquisition strategy.
The hotel industry has changed since the spring, however. The stocks of Marriott and Starwood have declined at least 9 percent since that time, and trends like the stronger dollar and competition from the room-sharing start-up Airbnb have made consolidation more attractive, according to analysts.That changed the dynamics of a deal. Hyatt was a competitive bidder almost to the end, people briefed on the negotiations said. But the unexpected suitor, Marriott, had an offer that was similar to Hyatt’s, and the Starwood board ultimately concluded that Marriott’s stock had greater potential, said these people, who spoke on the condition of anonymity because the proceedings were private.As it became clear that Marriott would prevail, the advisers to the two companies met and reached a deal in New York through the weekend, the people said.On Monday, Marriott announced that it would acquire Starwood for $11.9 billion in stock and $340 million in cash. That means cash was used for a mere 2.8 percent of the deal, which is the seventh-lowest percentage on record for cash-and-stock deals greater than $10 billion, according to data compiled by Dealogic.The deal creates the world’s largest hotel company, with more than 5,500 owned or franchised hotels with 1.1 million rooms around the world.The agreement represented a premium of about 6 percent above the average of where Starwood’s stock had traded in the 20 days before Nov. 13, according to a statement Monday. The premium was 19 percent using the same period through Oct. 26 when the recent takeover speculation began.