NEW YORK -- Starwood called off a $12.2 billion buyout agreement with Marriott in favor of an offer from a group of investors led by the Chinese insurance company Anbang.
The decision came after Anbang raised its offer for Starwood by nearly $370 million Friday, bringing the total to more than $14 billion.
Starwood, which owns the Sheraton and Westin hotel brands, has to pay Marriott $400 million to end the deal.
Chinese companies have parked a lot of money in U.S. assets in recent years, seeing it as a safe bet.
Last year, China's Haier Group, the world's biggest home appliance maker, said it would acquire General Electric Co.'s appliance business for $5.4 billion.
None have moved more rapidly than Anbang, however.
The company made a dramatic entry into the U.S. two years ago when it bought the famed Waldorf Astoria in New York for almost $2 billion in 2014. Days before it contested Marriott for control of Starwood, it agreed to a $6.5 billion deal to buy Strategic Hotels & Resorts Inc., which owns several high-end properties including the JW Marriott Essex House in New York and Hotel Del Coronado in San Diego.
The latest offer from Anbang and its partners is worth $83.67 for each share of Starwood, up from its previous offer of $81.50 per share. Starwood shareholders would get $78 in cash for each share they own plus $5.67 in stock for a spinoff of a vacation business.
Marriott has until March 28 to make another offer. The Bethesda, Md., company said Friday that it still believes its agreement with Starwood is superior and is contemplating its next step. Marriott first offered to buy Starwood in November, which would have created the world's largest hotelier.
"Bigger is generally better in the hotel business," said Lukas Hartwich, senior lodging analyst at Green Street Advisors LLC. "While the odds seem to favor the Anbang consortium, I'm not sure they have won just yet. There is still an argument to be made that Marriott plus Starwood is a situation where one plus one equals something more than two."
Marriott, which avoids overpaying for assets, probably won't engage in a protracted bidding war, according to analysts including Robert W. Baird & Co.'s David Loeb.
"While we expect Marriott to counter the consortium's proposal, we believe Marriott will remain disciplined, and it appears increasingly likely, in our opinion, that Starwood will be acquired by the consortium," Loeb wrote in a research note Friday.
If the deal falls through, it doesn't necessarily mean that Marriott will seek another acquisition. Starwood, based in Stamford, Conn., was unique in that it was putting itself up for sale. Marriott had said that one of the key assets Starwood brought to the deal was its much loved loyalty program, Starwood Preferred Guest.
Hyatt Hotels Corp. has long been rumored to be ripe for a merger or acquisition given its relatively small size compared with other hotel chains. However, most experts say such a deal would happen only if Hyatt were taking the lead. Although the hotel chain has been publicly traded since 2009, the Pritzker family still controls it through a class of super-voting stock.
Shares of Starwood Hotels & Resorts Worldwide Inc. rose $4.18, or 5.5 percent, to close Friday at $80.57. Shares of Marriott rose $1.36, or 1.9 percent, to $73.16.
Information for this article was contributed by The Associated Press and Hui-yong Yu of Bloomberg News.
Business on 03/19/2016