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?

Rank the following three stocks by their level of total risk, highest to lowest.

Baker Co. has an average return of 13 percent and standard deviation of 26

percent. The average return and standard deviation of Able Co. are 15 percent and

34 percent; and of Catco Co. are 9 percent and 19 percent." (Cornett, Adair, &

Nofsinger, 2016). Describe the components of the standard deviation formula.

On June 8, Alton Co. issued an $68,100, 11%, 120-day note payable to Seller Co. Assume that the fiscal year of Seller Co. ends June 30. Using a 360-day year in your calculations, what is the amount of interest revenue recognized by Seller in the following year? When required, round your answer to the nearest dollar.

$624

$1,249

$7,491

For the following reaction, Kc = 255 at 1000 K. CO(g)+Cl2(g)⇌COCl2(g) A reaction mixture initially contains a CO concentration of 0.1490 M and a Cl2concentration of 0.180 M at 1000 K.

a) What is the equilibrium concentration of CO at 1000 K?

b) What is the equilibrium concentration of Cl2 at 1000 K? c

) What is the equilibrium concentration of COCl2 at 1000 K?

Marko inc., is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of 6100, 11100, and 17300 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return 15 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.

Question 2 [10] TRUE/FALSE QUESTIONS Consider the following list of statements. Each statement is either true or false. You must read each statement carefully and then select the option that you believe is correct as your answer. Write down only the question number and next to the number either “True” or “False”. 2.1. The level or rate of unemployment is a stock concept, that is, it is measured at a particular date. 2.2. The consumer price index (CPI) is an index of the prices of a representative “basket” of consumer goods and services. The CPI thus represents the cost of the “shopping basket” of goods and services of a typical or average South African household. 2.3. A policy in respect of the level and composition of government spending, taxation and borrowing is called fiscal policy. 2.4. When the dollar appreciates (i.e. when the rand depreciates), imports from the United States become more expensive (in rand) in South Africa and South African exports to the United States become cheaper (in dollars) in that country, ceteris paribus. This will tend to dampen imports and stimulate exports (i.e. to improve the balance on the South African current account). 2.5. The way in which changes in the monetary sector are transmitted to the rest of the economy is called the financial transmission mechanism. 2.6. Monetary and fiscal policy (sometimes collectively called supply management) can be expansionary or contractionary. 2.7. Demand-pull inflation occurs when the aggregate supply of goods and services increases while aggregate demand remains unchanged. 2.8. Frictional unemployment (sometimes also called search unemployment) arises because it takes time to find a job or to move from one job to another. 2.9. The Phillips curve was originally regarded as a clear indication that unemployment and inflation could be traded off against each other. In other words, a lower inflation rate could be achieved by trading it off against, or exchanging it, for greater unemployment. 2.10. One complete cycle has four elements: a trough, an upswing or expansion (often called a boom), a peak and a downswing or contraction (often called a recession).

Oxidative dehydrogenation of ethane is the conversion of ethane with oxygen to yield ethylene and water.In addition to oxidative dehydrogenation, ethane/oxygen mixtures can also undergo partial oxidation, i.e. the formation of synthesis gas (CO and H2), as well as total oxidation, i.e. complete combustion of ethane towards CO2 and water.Hydrogen is of great interest as a feed for fuel cells. However, in order to use the hydrogen content of the syngas produced via partial oxidation of ethane, one would need to remove virtually all the CO from the mixture since CO is a strong poison for most fuel cells. This could be done through addition of steam in order to convert the CO via the so-called ‘water gas shift’ reaction (WGS: CO + H2O = CO2 + H2). Assuming a feed flow of 100 L/min of a feed mixture 75vol% air and 25vol% ethane, and furthermore assuming that the partial oxidation reaction goes to completion, how much steam needs to be added in order to completely convert the CO? (Assume stoichiometric conversion via WGS.) What is the composition of the effluent stream (in molar fractions)?

The amount of carbon dioxide in a gaseous mixture of CO2 and CO can be determined by passing the gas into an aqueous solution that contains an excess of Ba(OH)2, The CO2 reacts, yielding a precipitate of BaCO3, but eh CO does not react. This method was used to analyze the equilibrium compostion of the gas obtained when 1.77 g of CO2 reacted with 2.0 g of graphite in a 1.000 L container at 1100 K. The analysis yielded 3.41 g of BaCO3. Use these data to calculate Kp at 1100 for the reaction. CO2(g) + C(s) (those two sideways arrow--I don't know how to type them) 2 CO (g). Please answer the blanks or BOLD your answers. Questions: The initial concentration of CO2 is _________molar (3 s.f.) If -X is set equal to change in CO2, then the change of CO in terms of X is_______. The final concentration of CO2 is ________molar (3 s.f.) X is equal to _______molar. The partial pressure of CO2 is _________ atm and CO is __________atm, The Kp for the reaction at 1100 K is _______________, The number of moles of CO is _________moles (3 significant figures).