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Takeover battle for Starwood may not be over

Marriott's (MAR) sweetened $13.6 billion bid for rival hotelier for Starwood Hotels and Resorts trumps an offer from a group of investors lead by Chinese insurer Anbang.

The takeover fight may not be over yet, with some Wall Street analysts expecting Anbang, which owns New York's famed Waldorf Astoria hotel, to raise its offer. Here's what the battle is all about:

The brands: A combination of Marriott and Starwood would create the world's largest hotel chain, with 5,700 hotels and a total of 1.1 million rooms spread over 30 brands. Marriott's 19 brands include Residence Inn, Fairfield Inn and Suites, Courtyard, Renaissance Hotels and The RitzCarlton. Starwood's chains include Sheraton, Four Points, W Hotels, Westin and St. Regis.

Why merge? Marriott and Starwood say their respective strengths are complementary. Starwood's brands are well-known among affluent and millennial consumers, while the company expects benefit from Marriott's robust convention and resort business. The companies also have high hopes for Starwood's Element extended-stay lodging, which they said in a presentation"could be an interesting alternative in the housing rental services space (e.g., Airbnb, Home Away)." Tuna Amobi, an analyst with S&P's Global Market Intelligence, said hotels have had mixed results in competing against the room-renting services, which he called a "formidable" presence.

The deal has received preliminary clearance from antitrust regulators in the U.S. and Canada. Marriott would likely sell off Starwood's assets because it wants to focus solely on running hotels and not owning their real estate. Hotels, however, are usually sold to franchisees who will continue operating them under existing brands. Consumers won't notice a difference regarding service. Room rates aren't going to be affected.

Loyalty programs: For the immediate future, the two companies plan to continue operating their respective loyalty programs separately. But the longer-term plan is to combine them. Merging the programs will "increase access to new customers and "provide greater competitiveness in the digital marketplace," according to the companies. Wall Street analysts say the companies will take their time combining this crucial service to avoid angering their best customers. David Loeb, a lodging analyst at Robert W. Baird, noted that many customers participate in both Marriott and Starwood's programs. The hoteliers didn't provide a timetable for integrating their offerings.

"Merging points programs is hard," Loeb, who rates both companies' stocks as "neutral," said in an interview. "Marriott is good at this, and I suspect that they will find a way to pamper the Super Elites (customers) that Starwood is very much dependent on."

What's next: Both Loeb and Nomura Securities analyst Harry Curtis expect Anbang to come back with a higher offer. Anbang acquired New York City's famed Waldorf Astoria in 2014 for $1.95 billion and recently announced plans to buy the high-end Strategic Hotels and Resorts chain for $6.5 billion. Marriott may not be interested in a protracted bidding war because, at the current offer price, acquiring Starwood might not lift the company's earnings for at least three years.

Marriott has the "financial discipline" not to overpay, for the deal, Curtis said, noting "Paying even more would make the transaction even less attractive to investors."

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