Will Marriott (MAR) Stock Be Helped by Starwood Acquisition?
NEW YORK (TheStreet) -- Marriott International (MAR) - Get Report has agreed to acquire Starwood Hotels & Resorts Worldwide (HOT) in a deal valued at $12.2 billion to create the world's largest hotel company.
Under the terms of the deal, Starwood shareholders will receive 0.92 shares of Marriott and $2 in cash for each share of Starwood stock, totaling $11.9 billion in stock and $340 million in cash. The transaction's value is currently $72.08 per Starwood share.
The deal is expected to close during mid-2016.
"The driving force behind this transaction is growth," CEO Arne Sorenson said in a statement. "This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace."
TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolionoted on CNBC's Squawk on the Street this morning that the deal undervalues Starwood stock.
"This is a terrible deal for Starwood shareholders," Cramer, whose charitable trust owns Starwood stock, said. "On a fundamental basis I think that stock would be worth more."
Shares of the global lodging company are up 0.05% to $72.78 on heavy volume in afternoon trading on Monday, while shares of Starwood are lower by 4.77%.
About 8.73 million shares of Marriott International have been traded so far today, more than triple the company's average trading volume of about 2.35 million shares a day.
Additionally, many stocks within the travel and lodging industries are lower today following this weekend's terrorist attacks in Paris.
Separately, TheStreet Ratings team rates MARRIOTT INTL INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate MARRIOTT INTL INC (MAR) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, impressive record of earnings per share growth and increase in net income. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MAR's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 3.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MARRIOTT INTL INC has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MARRIOTT INTL INC increased its bottom line by earning $2.54 versus $2.01 in the prior year. This year, the market expects an improvement in earnings ($3.12 versus $2.54).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Hotels, Restaurants & Leisure industry average. The net income increased by 9.4% when compared to the same quarter one year prior, going from $192.00 million to $210.00 million.
- Net operating cash flow has increased to $328.00 million or 16.72% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.77%.
- After a year of stock price fluctuations, the net result is that MAR's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full analysis from the report here: MAR
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.