Marriott International (MAR - Get Report) said Monday it's buying Starwood Hotels & Resorts Worldwide (HOT) in a $12.2 billion deal that would create the world's largest owner of hotel chains.

The combination would own or franchise more than 5,500 hotels in more than 100 countries with 1.1 million rooms. It would generate pro forma fee revenue of $2.7 billion annually.

Terms of the deal call for Bethesda, Md.-based Marriott to pay 0.92 of its shares and $2 in cash for each share of Starwood, leaving Starwood holders with about 37% of the combination post-deal. Marriott, owner of brands including Ritz-Carlton, Courtyard and Residence Inn, said it expects to extract at least $200 million in annual cost savings from the transaction.

Stamford, Conn.-based Starwood, owner and franchiser of hotels under the St. Regis, Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points, Aloft and Element brand names, in April said that it had retained Lazard (LAZ - Get Report) to assist in evaluating strategic and financial alternatives. The company in October sold its timeshare business to Interval Leisure Group  (IILG) in a deal valued at $1.5 billion.

According to reports, Starwood had also attracted interest from rivals Hyatt Hotels  (H - Get Report) , InterContinental Hotels  (IHG) , Wyndham Worldwide  (WYN) as well as a consortium of Chinese investors.

Bruce Duncan, Starwood's chairman, said in a statement the company's "board concluded that a combination with Marriott provides the greatest long-term value for our shareholders and the strongest and most certain path forward for our company."

Marriott, which warned it expected one-time transaction costs of between $100 million and $150 million related to the deal, said that the deal should help it to grow its international exposure. Company CEO Arne Sorenson in a statement said that "the driving force behind this transaction is growth."

"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," Sorenson said. "This greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth and enhance long-term value to shareholders.