The Chinese Government Is Bailing Out Anbang (Which Was Going To Buy Starwood)

Any Starwood loyalist surely remembers late 2015 and early 2016, when we had no clue what the future of Starwood would look like. At the time there was a bidding war between Chinese conglomerate Anbang and Marriott, both of which wanted to acquire Starwood. There was a bidding war, and it looked like Marriott taking over Starwood was a sure thing, then it looked like Anbang taking over Starwood was a sure thing, and then eventually Anbang withdrew their offer.

Many Starwood loyalists (myself included) were hoping Anbang would win out in this bidding war, since it would leave the best chance of Starwood remaining an independent company. In many ways, we preferred the “evil” we didn’t know over the “evil” we did know. I put “evil” in quotes because I don’t think Marriott is actually evil, but rather because I felt like Starwood would lose its identity under their ownership.

While the details of the Marriott takeover of Starwood are widely known, there’s an interesting update about the alternative as well. Anbang has been doing horribly financially (like many Chinese conglomerates). The government had already sized control of them in February, with the former chairman being on trial for fraud and embezzlement.

There’s an even further update there, as this week the Chinese government gave Anbang a roughly 10 billion USD lifeline, in hopes of keeping them alive and eventually helping them find new investors.

Anbang has spent about 20 billion USD on international business deals since 2014, many of which were risky deals that they drew scrutiny for.

So I guess if the Anbang deal had gone through, at this point Starwood would basically be owned by the Chinese government, or Anbang would have had to sell Starwood in some sort of a fire sale, given what the scale of the deal would have been (not unlike what we’re seeing with HNA Group and Hilton). Is it sad that I still think it might have been the better of two options, as it would have kept Starwood independent (well, as independent as a company owned by the Chinese government can be)?

(Tip of the hat to Jake)

Comments

  1. It’s pretty clear, at this point, that Marriott was the better choice. Anbang would’ve had trouble keeping up SPG’s standards, and their financial troubles would’ve meant Starwood cutting corners to save on cost.

    SPG would likely also push Chinese agendas.

    No thanks.

  2. “Is it sad that I still think it might have been the better of two options, as it would have kept Starwood independent (well, as independent as a company owned by the Chinese government can be)?”

    I want to agree, but the last 2 years have proven otherwise. They also would have faced even worse business climate as more US companies would drop contracts with corporate(Chinese govt)-owned properties for data security reasons. And any fire sale of Starwood / spin out from the owners would have led to an exodus of properties from the portfolio. The REITs don’t have much tolerance for corporate shenanigans, which is why Hilton’s stability has attracted so many conversions/builds. Not to mention Starwood executives were running both their property-level brand equity and long-term financials downward on the way to selling themselves, so there would have had to be a large devaluation in SPG anyway if the company stayed independent, likely far worse than what I’ve seen Marriott is rolling out.

  3. The Chinese are not nice. They are playing the long game of subjugating the world. As soon as they have amassed enough power they show their true colors (south China sea)

    White guys should stop thinking with their dicks, given their attraction to Asian women, and Start thinking with their head to save the country. The Donald is better in this regard. He only likes white women so the Chinese blackmail doesn’t work on him. The Russians are another matter.

  4. I usually agree or can see your side on most points you make. But this is just ridiculous:

    “Is it sad that I still think it might have been the better of two options, as it would have kept Starwood independent (well, as independent as a company owned by the Chinese government can be)?”

    Yes, it is sad.

  5. @Debit – Not going to virtue signal at some of your more colorful and largely irrelevant language… But this is the long game? Chinese conglomerates leveraging to the hilt and buying “trophy assets” they can brag about at cocktail parties? Those conglomerates are now crumbling.

    The Chinese bought some of the worst commodity assets in the world; the big energy majors sold them all their junk and laughed all the way to the bank. The Chinese were left holding the bag on oil sands projects that do not work without tip top pricing.

    Terrible investments, ghost cities, tons of easy credit and debt, a brand news lifetime dictator… go take a survey of Chinese, almost all of them would rather be in the west. Some long game.

    And I oppose Trump’s moronic trade policies.

  6. So, both evils are unknown?

    “In many ways, we preferred the “evil” we _didn’t_ know over the “evil” we _didn’t_ know. “

  7. Lucky,

    1) Anbang would have likely had to sell Starwood even if they won it (likely to Marriott)

    2) Starwood was too small and is better off in a larger system. It was going to be bought eventually, whether by Marriott, Hilton or someone else

  8. I love how all those flyer talk losers will circle jerking over Anbang and now all became a bunch of ostriches cuz Anbang has proven itself to be useless and worthless

    No one can foresee what Marriott might do, but it sure as hell won’t be as bad as bailout and fire sale dictated by someone in the communist party

  9. Ben,

    Debit’s commentary is free spirit, thanks for your lively comments.

    The Chinese certainly had examples from their Japanese counterparts who did the same in their 1980’s buying spree of America. The Chinese thought they would fair better and did not take note.

    As well news this week that the strong HNA of China is forced to fire sell its 25% of Hilton.

    Kent

  10. Lucky, I gotta agree with EricNYC, usually I agree with you on most things but I thought you were wrong about Anbang from the start. As it turns out Anbang would have likely sold off SPG in pieces or in whole to Marriott or others at a discount. The best choice would have been if Hyatt would have bought SPG but their management was too short sighted to see it.

    Marriott will change SPG but it also appears that SPG will change Marriott, it will have to be judged on it’s own merits when we know what the future holds.

  11. @Eric J — I am with you all on that. It made no sense at all for anyone in the West, but especially for a red-blooded American, to favor a shadowy and opaque communist China company like Angbang over Red-White-and-Blue Marriott in a takeover bid for a public US company as ‘apple pie’ as SPG, simply because of ‘devotion’ to a loyalty program! Such a complete lack of perspective is why some of us have always felt (still do) that the intensity of SPG members’ loyalty bordered on the ‘unhinged’.

    What has just happened to Angbang now was preordained, given the type of company it was. It was destined to run afoul of the law, if not in China, then in some other international locale, most likely in the US.

    Starwood dodged a potentially fatal bullet when Angbang inexplicably dropped its bid to acquire it.

  12. @Debit

    Although I’m usually on the other side of the ledger. I agree with most of what you’ve said.

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