Marriott International’s proposed $13.6 billion purchase of Starwood Hotels & Resorts has hit a snag: China.
The Bethesda-based hospitality giant said Monday that the Chinese Ministry of Commerce needs up to 60 additional days to review the company’s purchase of Starwood, a deal that would create the world’s largest hotel company.
A green light from Chinese regulators is the last remaining hurdle for Marriott, which has already received necessary approvals from regulators in 40 countries, including the United States, and the European Union.
“Marriott and Starwood continue to believe that their planned merger transaction poses no anti-competitive issues in China,” Marriott said in a statement Monday.
The hiccup follows a heated bidding war between Marriott and a business group led by China’s Anbang Insurance Group, which offered $14 billion in cash for Starwood, before pulling its bid in April.
Marriott executives had originally expected the Chinese government to complete its antitrust reviews by Aug. 9, according to a July 28 call with Wall Street analysts. The latest development pushes back the process by as much as two months.
“We’ve provided very, very significant amounts of information [to Chinese authorities] over the course of the last six or eight months,” Arne Sorenson, president and chief executive of Marriott, said in the call. “We remain optimistic that we will receive clearance from China and will complete the transaction in the coming weeks.”
Experts say China’s extended review is not surprising given the size of the hoteliers’ reach in the country, which could be seen as posing a threat to China’s burgeoning hospitality sector. Marriott has 91 properties in the country, with an additional 146 in the works. Starwood, based in Stamford, Conn., has 283 hotels in China.
“This sort of bureaucratic entanglement is not uncommon in China,” said Eswar Prasad, a professor at Cornell University and former head of the International Monetary Fund’s China division. “Of course, China is trying to expand the role of its domestic players, so there are residual concerns about what this deal could mean for China’s own hospitality industry.”
China’s anti-monopoly law went into effect in 2008. As of May 2015, the ministry had reviewed 1,058 deals, and rejected just two: Coca-Cola’s proposed purchase of the Huiyuan Juice Co., and the creation of a shipping alliance among three European shipping companies. An additional 24 deals were approved conditionally, according to data from the U.S.-China Business Council. Although the initial review period is 30 days, many reviews stretch on for more than 200 days.
“This may be, at one level, a bureaucratic hiccup,” Prasad said of the Marriott-Starwood deal. “But it’s also a signal that the merged corporation would have to remain very much under the terms of Chinese regulators.”
If the deal is approved, the combined hotelier, to be based in Bethesda, would have 30 brands with 1.1 million rooms. It would bring together Marriott’s Courtyard, Ritz-Carlton and Renaissance Hotels brands with Starwood’s Sheraton, Westin and St. Regis.