SPG to Marriott: Just Say No

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Perhaps I can cross off the SPG-Marriot merger from my 2016 Festivus Airing Of Grievances. The China company Anbang placed a $13.2 takeover bid trumping Marriott’s previous offer. The end of this merger could be a small victory for points participants but the bigger question is how much scrutiny does such a deal deserve.

When Softbank, a Japanese corporation, bought out Sprint, the company had to agree to, according to Bloomberg, “limit use of telecommunications gear made by Huawei Technologies Co., a Shenzhen, China-based company named in a congressional report as a cybersecurity risk to U.S. companies because of ties to the Chinese military.”

When DP World, a Dubai SOE, sought to manage some of the United States’s busiest ports, Congress stepped in and threatened to block the deal citing security concerns. Whether these were legitimate concerns is debatable but Dubai ultimately withdrew from the transaction.

In today’s article in the WSJ, “Bill Crow, an analyst at Raymond James, said concerns over regulatory hurdles, potential political backlash and the tax consequences associated with a sale to a foreign entity aren’t material roadblocks,” even though, per the article, “Anbang’s deal for Starwood would represent China’s biggest purchase of a U.S. company.”

From a political standpoint, it makes sense that the Huawei deal and the DP World deal received intense scrutiny. Port management and telecommunications are sensitive industries making it an easy sell that they should be owned and operated by domestic entities or under domestic regulation. Hotels, on the other hand, do not have that Jack Bauer espionage branding. What’s shady about a Chinese auto insurance company purchasing a hotel chain? Is it simply a smart business decision for a growing multinational that happens to be Chinese to get into the world of hotel management? Is it a way for Anbang to move its capital from the mainland into the West? Or is it some nefarious plot backed by Beijing to infiltrate America by spying on corporate CEOs when they stay at SPG hotels?

Nobody knows but hopefully somebody asks.

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