28 Sep

Marriott-Starwood Merger Gets Final Approval

WRITTEN BY Ally Schmidt

Final approval

Last week, the Marriott (MAR)-Starwood (HOT) merger received final approval from the Chinese regulatory authority. After crossing the final hurdle, both chains completed the deal on September 23, 2016.

Marriott-Starwood Merger Gets Final Approval

The deal already received approval from other regulatory authorities including the US, Canada, the European Union, and Saudi Arabia.

Why was China holding the deal hostage?

One of the reasons for the delay could be the fact that it’s just the way the Chinese government operates. China is extremely protective of domestic businesses—that means holding up any merger that could be a possible threat to domestic businesses.

Another reason could be that China wanted to own part of Starwood or Marriott’s assets—as speculated by Thomas Horton, a law professor who specializes in China antitrust laws.

Why would China want hotel assets?

China wants in on the lucrative hotel business. In fact, according to Rhodium Group, China already put $5 billion in US hotels since 2010. Also, both of these hotel chains own big brand names with a presence in China and greater China.

However, the deal approval was granted without any such considerations being made.

Why was China’s approval so important?

Antitrust laws have the potential to prolong a merger for months and years. It becomes a time consuming and costly affair. The case was similar with the recent Anheuser-Busch InBev (BUD) and Sab Miller merger and Coca-Cola’s (KO) acquisition of a Chinese juice company.

Series overview

In this series, we’ll discuss the drama surrounding the Marriott-Starwood merger, what makes it such a huge deal, what it means for consumers and travelers. Investors can gain exposure to Marriott by investing in the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD). RCD invests ~1.2% of its portfolio in the stock.

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