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Starwood Corporate : exploring options to boost value inc acquiring or being acquired

Starwood Corporate : exploring options to boost value inc acquiring or being acquired

 
Old Apr 17, 15, 4:12 am
  #1  
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Starwood Corporate : exploring options to boost value inc acquiring or being acquired

This will be interesting to watch. I hope one of the larger groups doesn't swallow Starwood though, or it will mean an end to my Lifetime Platinum status!

http://www.bloomberg.com/news/articl...ck-in-real-m-a

(Bloomberg) -- Starwood Hotels & Resorts Worldwide Inc. may
need to accommodate activist shareholders with a merger or
buyout.
Starwood, which owns high-end hotel chains such as W and
Westin, has one of the worst stock-return and growth outlooks in
the industry. It’s also entering the second month of searching
for a chief executive officer as pressure builds for the $14
billion company to buy some lower-cost hotel brands to keep up
with rivals.
Activists tend to sniff around when leadership is in flux,
and there’s already speculation that one is targeting Starwood.
Analysts say the end result could be one of several deal
scenarios, such as selling to Wyndham Worldwide Corp. or
structuring a tax inversion with InterContinental Hotels Group
Plc.

<snip>

Last edited by Oxon Flyer; Apr 30, 15 at 7:52 am Reason: Replace full article with source link and summary, as per FT copyright rule 9
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Old Apr 17, 15, 5:05 am
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Thanks for sharing this.
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Old Apr 17, 15, 6:51 am
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Uh-oh! I sense "enhancements" to SPG not too far down the line...
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Old Apr 17, 15, 7:02 am
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Originally Posted by RafKa
Uh-oh! I sense "enhancements" to SPG not too far down the line...
Probably correct. The first one being no new promo for the middle of 2015.
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Old Apr 17, 15, 8:08 am
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Shareholders, activist or not, cannot determine company strategy...this is a root problem that is affecting so many companies who make the terrible mistake of allowing Wall Street to run their businesses.

The correct approach here? Tell so-called 'activist shareholders' who are screaming for a merger to go bleep-themselves - if they don't like what Starwood is doing, then sell the damn shares and go away.
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Old Apr 17, 15, 8:27 am
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Originally Posted by bocastephen View Post
Shareholders, activist or not, cannot determine company strategy...this is a root problem that is affecting so many companies who make the terrible mistake of allowing Wall Street to run their businesses.

The correct approach here? Tell so-called 'activist shareholders' who are screaming for a merger to go bleep-themselves - if they don't like what Starwood is doing, then sell the damn shares and go away.
Agree completely. Unfortunately, it's far too easy for an activist who sees "opportunity" to affect change by engaging in saber-rattling and threats of proxy fights.
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Old Apr 17, 15, 4:57 pm
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Originally Posted by HHonors OUTSIDER View Post
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Probably correct. The first one being no new promo for the middle of 2015.
Why? They don't do promos to lose money. Or, as some around here think, to 'reward' loyalty. They do promos to make money. Which is exactly what shareholders, existing or future, want.

Cheers,
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Old Apr 18, 15, 2:52 am
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Originally Posted by bocastephen View Post
Shareholders, activist or not, cannot determine company strategy...this is a root problem that is affecting so many companies who make the terrible mistake of allowing Wall Street to run their businesses.

The correct approach here? Tell so-called 'activist shareholders' who are screaming for a merger to go bleep-themselves - if they don't like what Starwood is doing, then sell the damn shares and go away.
To be fair, it sounds like the interim CEO and the activists are on the same page. He said he wants to a deal, so it's only a matter of time!
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Old Apr 18, 15, 8:24 am
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Originally Posted by JK View Post
To be fair, it sounds like the interim CEO and the activists are on the same page. He said he wants to a deal, so it's only a matter of time!
Then maybe this community needs to begin organizing (remember the SaveSkyMiles movement) and bring in franchisees, employees and other non-FT customers to organize our own no-merger activist movement?

My other half and I started talking to a contact about bringing in EB Visa money to do a Starwood hotel project...but if the company is planning a merger, we're not going to invest any money into a brand that might end up suffering a radical change in the next few years. I wouldn't invest money to open a Five Guys, only to be told a year later the company is owned by Burger King now and we need to change the menu.
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Old Apr 18, 15, 8:57 am
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1) While I am not as experienced in M&A as others on here, I do believe that activists have influence. How can they not? If they buy enough % of the company, or become a board member through one channel or another - they can seriously impact companies. I look at AOL/Patch for example...(for those of you who know this long battle)

2) I do think Starwood is not positioning themselves in a way for meaningful growth in the short term. They are playing a big game, with a huge bet on Asia. Rightfully so, the asian culture may identify with the Starwood brand, and if all goes as planned - maybe Starwood can become a global megabrand through its asian clientele.

3) Sources reference Starwoods lack of limited service hotels. Aloft/Four Points simply do not have the market penetration.

4) I think this situation all depends on what shareholders and mgmt. expect for growth. It seems well stated that the high end market is only growing so much, there just isn't enough wealthy people traveling all the time to squeeze. I really wish that SPG would just ink a bunch of deals with services/real estate mgmt companies to go build 130-150 Four Points and 60-80 Aloft's across the USA - in the 8-12 months. I personally think they should ramp up the Element brand even more. If SPG did a 160-220 hotel increase in the Element brand, they would get the growth they want.
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Old Apr 18, 15, 9:42 am
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Originally Posted by bocastephen View Post
Then maybe this community needs to begin organizing (remember the SaveSkyMiles movement) and bring in franchisees, employees and other non-FT customers to organize our own no-merger activist movement?
Warren Buffett always advocates that shareholders buy products of their investee firms. But with rampant "activist" hedge fund activities, we may soon be forced to buy stocks of companies we like, just to ensure their survival...

In no way are Starwood shares cheap: at 25x P/E (2015e), they are almost on a par with Hilton (27.9x), La Quinta (26.4x); and definitely better appreciated than Marriott (19.8x) and Wyndham (15.5x). Starwood's cashflow (EBITDA) is even better valued at 13.7x (2015e), vs. Hilton (13.5x), La Quinta (11.1x), Marriott (11.1x). For crying out loud, Starwood also has the highest dividend yield compared to the rest. [Thanks Goldman for the estimates]

Only trouble for Starwood: it has been too richly valued at the start, so it LAGS the spectacular share price boom in the last 12 months...

Only apparent strategic "mistake" of Starwood: not having too much debt on its balance sheet (this will probably be on the "white paper" proposal of the hedge funds). But listen: hotel occupancy at 64.7% end 2014 is already above the last cycle peak (63.5% in 2005). The last time hotel occupancy had been even higher was in 1994... Add to that, room additions in the next two years are expected to exceed the last five. Can we accuse Starwood for not taking up enough debt??

Customer loyalty used to be the litmus test for company valuation. But these days turning quick profits of short-term shareholders (=activist hedge fund) trump the value of loyal premium customer loyalty (Burn the SPG program, merge it with IHG for the lower end client base to boost short-term bottom line, to have more "growth" is executing precisely that. Remember: your Starpoints are long term investment by Starwood to ensure you come back, and pay maybe a 5-10% premium over the cheapest alternative).

Now I understand why there is no Q2 promotion from SPG - management needs to boost the short-term profit to show the financial analysts that there is "growth". Maybe they should actually publicize this in a high-profile way so that long-term SPG clients know that they are actively contributing to the survival of their brand? (BUT then isn't it pathetic that LT clients need to do that, alongside donations to the UNICEF children fund???)

Too bad that Starwood had not been bought out by Buffett during the crisis...

And I'll leave it to the American members on this Board to comment on the Tax Inversion idea.
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Old Apr 18, 15, 11:17 am
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Originally Posted by accidental_tourist
Originally Posted by bocastephen View Post
Then maybe this community needs to begin organizing (remember the SaveSkyMiles movement) and bring in franchisees, employees and other non-FT customers to organize our own no-merger activist movement?
Warren Buffett always advocates that shareholders buy products of their investee firms. But with rampant "activist" hedge fund activities, we may soon be forced to buy stocks of companies we like, just to ensure their survival...

In no way are Starwood shares cheap: at 25x P/E (2015e), they are almost on a par with Hilton (27.9x), La Quinta (26.4x); and definitely better appreciated than Marriott (19.8x) and Wyndham (15.5x). Starwood's cashflow (EBITDA) is even better valued at 13.7x (2015e), vs. Hilton (13.5x), La Quinta (11.1x), Marriott (11.1x). For crying out loud, Starwood also has the highest dividend yield compared to the rest. [Thanks Goldman for the estimates]

Only trouble for Starwood: it has been too richly valued at the start, so it LAGS the spectacular share price boom in the last 12 months...

Only apparent strategic "mistake" of Starwood: not having too much debt on its balance sheet (this will probably be on the "white paper" proposal of the hedge funds). But listen: hotel occupancy at 64.7% end 2014 is already above the last cycle peak (63.5% in 2005). The last time hotel occupancy had been even higher was in 1994... Add to that, room additions in the next two years are expected to exceed the last five. Can we accuse Starwood for not taking up enough debt??

Customer loyalty used to be the litmus test for company valuation. But these days turning quick profits of short-term shareholders (=activist hedge fund) trump the value of loyal premium customer loyalty (Burn the SPG program, merge it with IHG for the lower end client base to boost short-term bottom line, to have more "growth" is executing precisely that. Remember: your Starpoints are long term investment by Starwood to ensure you come back, and pay maybe a 5-10% premium over the cheapest alternative).

Now I understand why there is no Q2 promotion from SPG - management needs to boost the short-term profit to show the financial analysts that there is "growth". Maybe they should actually publicize this in a high-profile way so that long-term SPG clients know that they are actively contributing to the survival of their brand? (BUT then isn't it pathetic that LT clients need to do that, alongside donations to the UNICEF children fund???)

Too bad that Starwood had not been bought out by Buffett during the crisis...

And I'll leave it to the American members on this Board to comment on the Tax Inversion idea.
Excellent post accidental_tourist. Thank you.
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Old Apr 18, 15, 12:38 pm
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News: Starwood Hotels Is Giving Activists Reason to Check In

Instead of a large deal with IHG or Wyndham couldn't Starwood buy a limited assortment brand like La Quinta or Extended Stay America to cover their lack of properties on the lower end spectrum? Not advocating it but hasn't there also been talk that Accor wanted to rid themselves of the Motel 6 hotels brand. A deal with Carlson would also give them nice coverage on the lower end spectrum in the U.S. with Country Inn and Suites and help Carlson on the higher end in the U.S.
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Old Apr 18, 15, 3:55 pm
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Club Carlson has such weird market penetration due to acquisitions it seems. But it seems like a perfect match for SPG.

Talking about weird market penetration, and I think Marriott has some serious gaps in Italy and of course if you compare anyone to SPG - they look weak in China.

Originally Posted by christianj View Post
Instead of a large deal with IHG or Wyndham couldn't Starwood buy a limited assortment brand like La Quinta or Extended Stay America to cover their lack of properties on the lower end spectrum? Not advocating it but hasn't there also been talk that Accor wanted to rid themselves of the Motel 6 hotels brand. A deal with Carlson would also give them nice coverage on the lower end spectrum in the U.S. with Country Inn and Suites and help Carlson on the higher end in the U.S.
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Old Apr 18, 15, 4:05 pm
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Originally Posted by christianj View Post
Instead of a large deal with IHG or Wyndham couldn't Starwood buy a limited assortment brand like La Quinta or Extended Stay America to cover their lack of properties on the lower end spectrum? Not advocating it but hasn't there also been talk that Accor wanted to rid themselves of the Motel 6 hotels brand. A deal with Carlson would also give them nice coverage on the lower end spectrum in the U.S. with Country Inn and Suites and help Carlson on the higher end in the U.S.
I don't believe a low end brand is needed in the SW portfolio. Four Points is flexible enough that it can cover the mid range down to the upper budget range depending on location. I won't disclose the specific area that we were thinking to put a Four Points with EB investment money, but the location would have relatively low land or existing property-to-convert acquisition costs and lower operating expenses than an urban or urban-adjacent center - so I can offer a solid quality product and not break anyone's nightly budget...plus the brand gives me flexibility to offer meeting space, wedding venue space, etc - I don't know many people who book their wedding reception at a local Travelodge or Motel 6.

Frankly I don't want a low end property to own - I don't need the hassle of constant refurbishment to undo guest damage, hiring security to chase out prostitutes and drug dealers, etc etc. I want mid priced business travelers and road trippers who appreciate the features, quality and value of my property and the brand is a magnet to draw SPG members into an area that has no current SPG coverage.

Days Inn, Extended Stay America, Value Inn, etc have a place in the American hotel landscape, but not as part of the Starwood portfolio. Now I believe there are a few European-only budget chains that are low priced, well maintained, very clean and offer a decent feature set (like Motel One of Germany or the Ibis brand), but I don't think you can "upscale" a budget brand in the US market and not have the individual properties end up trashed because of our unfortunate cultural practices.
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