Anbang takeover of Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT) hangs in the balance as the Chinese insurer tabling a superior offer. Enforcing the deal promises to be the biggest hurdle, considering the Anbang-led consortium is based in China.
Anbang is currently engaged in a fierce bidding contest with Marriott International Inc (NASDAQ:MAR). Should it emerge the winner, Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT) may force it to complete the transaction should financing or other issues crop up.
Starwood may seek court’s assistance to enforce the deal. How successful it will be on the same, remains to be seen given the fact that Anbang has all of its assets in China. Enforcing a US court order in China is something unheard of and a major point of concern at the moment.
China does not have the best reputation when it comes to the enforcement of foreign laws. US firms, as a result, have always shied away from deals involving Chinese companies. Some companies however have tried to get around this issue by insisting on arbitration as per a United Nations 1958 treaty.
Use of US Assets as Collateral
Apart from pursuing arbitration, Starwood lawyers may also push for collateral in US assets before they begin talks with Anbang. By doing so, they should be able to secure any judgment without having to seek the assistance of Chinese courts.
Some of the assets that Anbang can tie to the deal as collateral include the Walldorf Astoria that it bought for $1.95 billion as well as Blackstone worth $6.5 billion. Even so, these assets are still not enough, as the Chinese company is believed to have bought them through debt. Deposit in the form of cash or credit letter could also act as collateral.
Financing is not the only headwind in the way of Anbang buying Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT). Given Anbang is a Chinese company it is poised to come under immense regulatory scrutiny. Even though hotel chains do not raise national security concerns, proximity of Starwood hotels to national security facilities may come under scrutiny.
Starwood Hotels & Resorts Worldwide Inc(NYSE:HOT) may have to divest some of its assets next to the Whitehouse if any deal is to see the light of day. How well the hotel chain deals with these issues will determine a great deal how future deals involving Chinese companies will proceed.