M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Friday, April 1, 2016

Starwood rollercoaster

Earlier this week when Starwood announced that Anbang had upped its bid for the hotelier, they were very careful with their language. The previous weekend when Anbang made its first topping bid, Starwood declared that bid a "superior offer" and started the process to terminate its merger agreement with Marriott: 

 
On March 18, 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 11:59 p.m. ET on March 28, 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 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.
Of course, we know that Marriott came back to the table and negotiate a counter proposal that Starwood accepted over that weekend.  Then Anbang returned with an additional topping bid. But this time, Starwood choose its words very carefully:
On March 26, 2016, Starwood received a non-binding proposal from the Consortium, under which the Consortium would acquire all of the outstanding shares of Starwood common stock for $81.00 per share in cash. Starwood’s Board of Directors, in consultation with its legal and financial advisors, determined that this proposal is reasonably likely to lead to a Starwood Superior Proposal (as defined in the Merger Agreement), allowing Starwood to engage in discussions with, and provide diligence information to, the Consortium in connection with the Consortium Proposal. Starwood commenced discussions with the Consortium on March 26, 2016 and, in those discussions, the Consortium made a revised proposal with an increased purchase price of $82.75 in cash per share of Starwood common stock. Starwood and the Consortium are continuing to discuss non-price terms related to the Consortium Proposal, and are working to finalize the other terms of a binding proposal from the Consortium, including definitive documentation.
Rather than determine that the second Anbang offer was a "superior proposal" Starwood announced the offer at a much earlier stage: when it was still a non-binding proposal only "reasonably likely to lead to a superior proposal." No surprise then when Marriott sat on its hands. Sure Anbang's proposal could lead to a better bid, or Starwood could use the fact that Anbang was still hanging around and hadn't gone home yet as an incentive for Marriott to bid against itself. A little bit of negotiation craft. Marriott didn't take the bait, and Anbang pulled its non-binding offer.  Good thing for Starwood bidders aren't like jealous girlfriends/boyfriends.
 
-bjmq 

 

https://lawprofessors.typepad.com/mergers/2016/04/starwood-rollercoaster.html

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