China's Anbang aims to become global hotelier

China's Anbang Insurance Co is about to make major forays into the US lodging business with offers for Starwood Hotels & Resorts Worldwide Inc and a US luxury hotel collection from the Blackstone Group LP.

Media reports on Monday said that Anbang was part of a consortium that includes American private-equity firms J.C. Flowers & Co and Primavera Capital Group offering nearly $13 billion for Starwood, which operates well-known hotel brands like Sheraton and Westin.

The offer values Starwood at about $76 a share, topping a pending offer from US hotel giant Marriott International Inc, which values Starwood at about $72 a share, most of which would be in a stock swap.

"We do not believe Anbang's first offer is its best and final offer. It is highly conceivable that both Marriott and Anbang will raise their offers in order to win Starwood," analysts C. Patrick Sholes and Bradford Dalinka wrote in a research note at SunTrust Robinson Humphrey Inc.

David Loeb, an analyst with Robert W. Baird Co Inc, doesn't expect Marriott to adjust its offer.

Wes Golladay, an analyst at RBC Capital Markets, said Marriott may increase its offer for Starwood but not aggressively. "The Marriott offer has more certainty (than the Anbang offer)," Golladay told China Daily. "It has some antitrust approval and basically fairly values Starwood."

Golladay said that the Marriott offer provides a better business rationale. "They have the potential to create better synergies and more cost-cutting potential since they are already in the business," he said.

The Starwood offer came two days after Anbang also reportedly agreed to buy a luxury hotel portfolio from Blackstone Group's Strategic Hotels & Resorts Inc for about $6.5 billion.

Blackstone had just completed the purchase of the Strategic collection, which includes the Essex House in New York and the Hotel del Coronado in San Diego, last year.

Anbang acquired the Waldorf Astoria New York hotel in 2014 for about $1.95 billion.

Can Anbang successfully manage the Starwood and Strategic acquisitions?

"We don't really know, because we don't know what specific role Anbang will play," Baird's Loeb said. "For example, Anbang may decide to own the real estate while Flowers and Primavera run the (Starwood) hotels."

Loeb also said that Starwood has a deep-enough bench of executive talent that could be induced to stay and continue to successfully manage the Starwood properties.

If the two deals are completed, they will signify the remarkable rise of Anbang in a little more than a decade from an auto insurer into a major global financial services corporation.

Slowing growth at home and the desire to diversify overseas investments have spurred Chinese companies such as Anbang to become aggressive acquirers. Earlier this year, China National Chemical Corp or ChemChina, agreed to pay $43 billion to buy Swiss chemical concern Syngenta AG in a deal that would be the largest foreign takeover by a Chinese company.