US Hotelier and Chinese Insurer Contest Ownership of Starwood In March 2016, struggling US hotel group, Starwood Hotels and Resorts, owner of Weston and Sheraton Hotels, found itself in a bidding war. It had accepted an offer of $10.8bn (€8.1bn, £6.5bn) in cash and stock from US hotelier Marriott International the previous year. Whilst discussing the details of the acquisition, due to close in March 2016, Beijing-based Anbang Insurance Group made an unsolicited offer of $12.9bn. Marriott responded by increasing its offer to $13.6bn and Starwood investors eagerly awaited higher bids.
If Marriott succeeded it would create the world’s largest hotel company with 5500 owned or franchised hotels with 1.1 million rooms under 30 brands. Marriott believed it was a compelling bidder having demonstrated multi-year industry-leading growth, powerful brands and consistent return of capital to shareholders, with shares trading consistently above those of its peers. Having already conducted five months of extensive investigation and joint integration planning with Starwood, including careful analysis of the brand architecture, Marriott was confident it could make annual cost savings of $250m, generate greater long-term shareholder value from a larger global presence and offer wider choice of brands to consumers and improved economics to owners and franchisees.
Little known outside of China before 2013, Anbang Insurance Group originated as a small car insurer, before China’s move to give insurers greater freedom to invest their money. This allowed Anbang to sell investment products and other services, making them major players in real estate. A slowing Chinese economy and devaluing currency encouraged many domestic companies to invest overseas and Anbang then aggressively pursued overseas deals, largely fuelled by selling high yield investment products at home. Having spent $2bn on insurers in Belgium and South Korea, Anbang also made many large US acquisitions including the Waldorf Astoria for $1.95bn, the American insurer, Fidelity & Guaranty Life Insurance ($1.6bn) and the biggest-ever acquisition of American property assets by a mainland Chinese buyer, Strategic Hotels and Resorts ($6.5bn), owner of Four Seasons hotels, the Fairmont and Intercontinental hotels and the JW Marriott Essex House hotel. As a late bidder, Anbang had had little time for in-depth investigation of Starwoods but was making its bid in a consortium that included American private equity firm J.C. Flowers & Company. With close personal links to the Chinese Government, commentators believed Anbang could greatly increase Starwood’s cash reserves.
On 28 March, Anbang raised its bid to $14bn and analysts wondered whether Marriott would be able to raise its offer further as increasing the cash part of its offer could threaten its investment-grade rating and adding more stock would dilute its earnings per share. Marriott’s response was to say that its offer was not just about price. It also questioned whether Anbang had sufficient funds to close the deal and whether the Committee on Foreign Investment (Cfius), which reviews all deals for American companies that involve national security, would intervene as it had with the Waldorf sale, although this had been approved. Starwood properties could be deemed to be near government offices and military bases. This could delay the deal and possibly discourage Anbang’s bid. Commentators also wondered whether they had the skills to manage Starwood as the management team at its Belgian acquisition had left quickly amid complaints about Anbang’s management style.
Questions
1. How do the bidders’ acquisition motives differ?
2. What are the strategic and organisational fit implications of both bids?
In: Finance
Consider a firm with the following total cost function: TC = 50 + 6Q + 4Q2 . The marginal cost associated with the given cost function is MC = 6 + 8Q. Assume the firm is operating in the short-run.
A) What are the firm’s fixed costs? What are the firm’s variable costs?
B) Calculate average fixed costs, average variable costs, and average total costs.
C) Suppose the firm is in a competitive market and is a price taker. Suppose the equilibrium price is P = 86. Will the firm participate in the market or shutdown? Determine whether the firm is able to recover its fixed costs when P = 86.
In: Economics
Please answer questions 2 through 7
1. A deli raises the price of its deluxe cheeseburger from $9.50 to $10.50. The quantity sold falls from 125/day to 100/day. Calculate the arc price elasticity of demand.
2. Given your answer to (1), and given that the marginal cost of is $5, should the restaurant raise or lower its price of its deluxe cheeseburger to increase profits?
3. AutoClean does car detailing for $80 per car. Market research indicates that if the price was increased to $105 quantity demanded would fall to zero. Assuming that demand can be modeled with a linear demand curve, estimate the price elasticity of demand at $80.
4. The only thing that changes in Dullsville is the price of a stay at the Dullsville Inn. You've collected the following data on the rates charged (for a suite with 2 queen-sized beds and 'free' continental breakfast) and the number of rooms occupied. The Inn has 100 suites, and at no time were potential visitors turned away due to no vacancy. Use this data to estimate a 'constant elasticity' demand function. Estimate the price elasticity of demand.
Observation Rate per night Quantity (rooms rented)
1 $70 40
2 $65 50
3 $80 30
4 $52 62
5 $92 31
6 $64 41
7 $43 78
8 $74 35
9 $83 33
10 $54 52
11 $87 30
12 $84 28
13 $68 40
14 $43 69
15 $48 53
16 $78 34
17 $72 48
18 $58 53
19 $56 59
5 - 7. Next door to the Dullsville Inn is the Vagabond Hotel. Their rate for a single room is $50/night, with an average of 60 rooms occupied per night. Assume that the industry norm for the price elasticity of demand for hotels like the Vagabond Hotel is -1.6. Further assume that the demand function is reasonably approximated with a constant-price elasticity of demand functional form: Q = aP^b, where b is the price elasticity of demand.
5. Use the above information to calculate the value for 'a.'
6. Use the resulting demand function to estimate the number of rooms occupied if the price was increased to $60/night.
7. The marginal cost of providing a room at the Vagabond Hotel is $20. Use the markup rule for profit maximization to calculate the profit maximizing rate.
In: Economics
Said Al Hamli and his friend Khaled Al Masri are the owners of a small hotel, the Sun Star, in the Red Sea town of Hurghada. Close to Cairo, the resort town has grown from a fishing village to one of Egypt’s famous vacation spots. Hurghada is the gateway to many small islands and offshore reefs favored by recreational snorkelers and divers and many tourists combine their stay with excursions to the Nile Valley, the Great Pyramids and Luxor.
To take advantage of the growing numbers of tourists, particularly from Europe and the Middle East, Said and Khaled are planning to double the room capacity of their hotel by adding a second building to the already existing structure. Fortunately, Said recognized the great potential of Hurghada ten years ago, well before the town became a hub for recreational tourism, and bought the land adjacent to the hotel for relatively little money when it was still under construction.
Now, Said and Khaled are studying the new layout and trying to determine if the expected revenues justify the substantial initial investment of EGP 70 million ($11.8 million). According to their calculations, operating cost would rise by EGP 23.8 million ($4 million) in the first year, which would include hiring and training of new personnel, maintenance of facilities and equipment etc., and likely increase by about 5 percent per year thereafter. With an aggressive marketing strategy, Said and Khaled believe that a revenue enhancement of EGP 20.8 million in the first year is realistic and that a subsequent annual increase of about 15 percent for eight to nine years, with revenues leveling off thereafter, can be achieved. Ideally, Khaled would like to retire in ten years. Seeking advice from you, a knowledgeable friend, they share their detailed cost and revenue projections with you.
|
Year |
Cash (EGP) |
Revenue (EGP) |
|
0 |
−70,000,000 |
|
|
1 |
−23,800,000 |
20,825,000 |
|
2 |
−24,990,000 |
23,949,000 |
|
3 |
−26,239,000 |
27,541,000 |
|
4 |
−27,551,000 |
31,672,000 |
|
5 |
−28,929,000 |
36,423,000 |
|
6 |
−30,375,000 |
41,887,000 |
|
7 |
−31,894,000 |
48,169,000 |
|
8 |
−33,489,000 |
55,395,000 |
|
9 |
−35,163,000 |
63,704,000 |
|
10 |
−36,922,000 |
73,259,000 |
QUESTIONS
|
1. |
Determine the resulting net cash flow for each year; and compute:
|
||||||
|
2. |
Give your decision on each result in terms of the project’s expected profitability and Khaled’s ten-year investment horizon |
In: Accounting
Given numRows and numCols, print a list of all seats in a theater. Rows are numbered, columns lettered, as in 1A or 3E. Print a space after each seat, including after the last. Ex: numRows = 2 and numCols = 3 prints:
1A 1B 1C 2A 2B 2C
#include <iostream>
using namespace std;
int main() {
int numRows = 2;
int numCols = 3;
// Note: You'll need to define more variables
/* Your solution goes here */
cout << endl;
return 0;
}
In: Computer Science
Covid-19 started a derived demand, for instance, the high demand for hand sanitizer led to the derived demand of the isopropyl alcohol market .
What are some other covid- 19 derived demand, beside facemask ?
Definition of "Derived Demand"
Derived demand is a term in economics that describes the demand for a certain good or service resulting from a demand for related, necessary goods or services. For example, the demand for large-screen televisions creates a derived demand for home theater products such as audio speakers, amplifiers, and installation services.
In: Economics
A person with a cough is a persona non grata on airplanes, elevators, or at the theater. In theaters especially, the irritation level rises with each muffled explosion. According to Dr. Brian Carlin, a Pittsburgh pulmonologist, in any large audience you'll hear about 18 coughs per minute.
(b) Find the probability of four or fewer coughs (in a large auditorium) in a 1-minute period. (Use 4 decimal places.)
(c) Find the probability of at least eight coughs (in a large auditorium) in a 32-second period. (Use 4 decimal places.)
In: Statistics and Probability
In: Economics
Consider a home theater system consisting of a television set, a receiver, a DVD player, and speakers. Draw a system diagram for this system. Include both components and links.What are the inputs to this system? What are the outputs? (Remember that the DVD player and receiver are both components within the system). Now draw a system diagram for the receiver subsystem. Include both its primary components and the links between them. What are the inputs and outputs for the receiver subsystem?
Do these inputs and outputs confirm to the links connected to the receiver in your system diagram?
In: Electrical Engineering
Fixed Asset Discussion:
Examples of sectors/industries in pathways could be:
In: Accounting