(Reuters) — Hyatt Hotels Corp (H.N) is in talks to buy U.S. hotel operator Starwood Hotels and Resorts Worldwide Inc (HOT.N) in a cash and stock deal, a source familiar with the matter said.
Hyatt’s management would retain control of the combined company and a deal could be announced in the coming weeks, the source told Reuters.
Starwood is valued at about $12.75 billion while Hyatt has a valuation of about $7.23 billion. Both the companies declined to comment.
China’s sovereign wealth fund and two big Chinese companies had expressed interest in Starwood Hotels, joining other suitors from around the world, a source familiar with the matter told Reuters on Tuesday.
“My hunch is they (Hyatt) would be able to (buy Starwood). They could pull it off but it would be a stretch,” Argus Research Co analyst John Staszak said.
Staszak said a foreign acquirer might be ideal as it would be willing to pay a premium price.
Starwood had reached out to potential bidders including InterContinental Hotels Group Plc (IHG.L), Wyndham Worldwide Corp (WYN.N) and sovereign wealth funds in July, three months after it decided to explore a sale, sources told Reuters.
According to Nomura Securities analyst Harry Curtis, Starwood could be bought at over $100 per share, which would value the company at more than $17 billion.
“Assets like HOT (Starwood) do not come up for sale often, so it is unrealistic to believe that a suitor could buy the company close to its current tag sale valuation,” Curtis wrote in a note.
Interval Leisure Group (IILG.O) said on Wednesday it would buy Starwood Hotels’ vacation ownership business, which it valued at about $1.5 billion.
Starwood, which owns the St. Regis and Sheraton hotel brands, also on Wednesday reported a better-than-expected third-quarter profit, driven by higher occupancy rates.
Rival Hilton Worldwide Holdings Inc (HLT.N) reported a higher third-quarter profit, helped by a rise in occupancy and room rates.CNBC reported earlier on Wednesday that Hyatt is in talks to buy Starwood Hotels (cnb.cx/1Re6m7Z)
Shares of Hyatt were marginally up at $50.72 while Starwood was up 5.7 percent at $79.12 in late-morning trading on Wednesday.