Why is a Chinese insurance company paying top dollar – or more than top dollar – to acquire Starwood Hotels?
That’s a question the financial press is exploring this morning. Yesterday’s $14 billion cash bid from China’s Anbang Insurance values the hotel company at more than 13 times earnings. By comparison, companies like Hyatt and Hilton trade at 10 times earnings. Marriott’s last offer was $13.6 billion in cash and stock, and analysts say it would be unlikely – and probably unwise – for the hotel company to raise its offer.
Marriott can argue that by combining forces with Starwood, it can create new efficiencies in operations, marketing, etc., that justify a premium price. But how to explain the higher bid from an insurance company, with no expertise in operating hotels?
Adding to the mystery is the fact that Anbang’s ownership structure is incredibly opaque. The Wall Street Journal has a story this morning that traces a significant chunk of the company’s ownership back to a car dealership in Jiangsu province. The Journal attempted to contact the investment company owned by the car dealership and reports that “the person who answered the phone hung up when asked about Anbang.” Other efforts to contact registered owners of the company turned up similar dead ends.
Anbang may be able to turn down beds and put chocolates on pillows as well as the next owner. But it does make you wonder. One theory is that the company is buying foreign assets as a currency hedge against a coming devaluation of the renminbi. It certainly wouldn’t be the only Chinese company looking for such a hedge. Meanwhile, Marriott’s best hope for prevailing now could be rumors that Chinese regulators may block the deal, using a rule that prevents Chinese insurance companies from investing more than 15% of their total assets abroad.
More news below.
• FBI unlocks iPhone without Apple’s help
Apple’s battle with the F.B.I. over unlocking an iPhone used by one of the San Bernardino shooters has ended after the government said on Monday that it had managed to access the data on its own. But the resolution of the legal drama raises a new question: If the F.B.I. can unlock the phone, can anyone else? The answer is a potential public relations black eye for Apple, which brags about its iPhone encryption as an effective wall against hackers. On the other hand, the F.B.I.’s technique, which went undescribed in court papers, could merely work on the one phone in the case, a 5c with an iOS 9 operating system. Fortune
• Theranos is dealt another blow
In a peer-reviewed study released on Monday comparing results obtained by different diagnostic labs, scientists at the Icahn School of Medicine at Mt. Sinai found that Theranos reported “tests outside of the normal range” 1.6 times more often than did the two leading independent labs, LabCorp and Quest. Theranos’ “rejection” rates were also higher than those of its rivals, the researchers concluded. The variation in the results could cause practitioners to “either inappropriately initiate or fail to appropriately initiate statin therapy.” Theranos, meanwhile, accused two of the scientists of conflicts of interest, because of associations with a firm it views as a competitor. Fortune
• Oracle wants $9.3 billion from Google
Business technology giant Oracle is reportedly asking for a total of $9.3 billion from Google relating to a lengthy legal battle over software copyrights. Oracle claims it should receive $475 million in damages in addition to $8.8 billion relating to “profits apportioned to infringed Java copyrights,” according to court documents cited by a IDG News Service report. The two companies have long been at odds over whether Google improperly used so-called APIs (application programming interfaces) related to the Java programming language to create its Android operating system. Fortune
• EgyptAir plane hijacked
An Egyptian plane on a flight between Alexandria and Cairo was hijacked and forced to land in Cyprus by a man apparently distressed over a family matter. After the EgyptAir plane landed at Larnaca airport, the hijacker released all the people onboard except four foreign passengers and the crew following negotiations, EgyptAir said. About 60 people, including seven crew, had been onboard the Airbus 320, Egyptian and Cypriot officials said. The pilot reported that the man was strapped with explosives, although this was not confirmed. Reuters
• Valeant CEO is subpoenaed
Valeant Pharmaceuticals International’s outgoing chief executive officer, Michael Pearson, was subpoenaed to testify at a hearing next month by a Senate committee investigating drug price hikes. The April 27 hearing will be the third in a series that the Senate Special Committee on Ageing has held on pharmaceutical companies which it says operate more like hedge funds, by pumping up the prices of decades-old drugs that they buy the rights to. The subpoena adds to recent troubles at Valeant, which is facing numerous challenges including probes of its accounting and business practices, a ballooning debt and a slumping stock price. Last week, the drugmaker said it would search for a new CEO to replace Pearson. Bloomberg
Around the Water Cooler
• Fortune’s 50 best workplaces for flexibility
More than ever, the workplace is in a state of disruption. For our first-ever flexibility list, we looked for employers that have welcomed the rapid change to how we work by offering job sharing, telecommuting, compressed workweeks, flexible scheduling, and phased retirement options to employees. Great Place to Work surveyed more than 209,000 workers in the U.S to find out who’s getting it right. Texas-based tax services and consulting company Ryan leads the list, with a policy called “MyRyan” that allows a radical degree of flexibility for working hours. Fortune
• Pandora passes baton to founder
Shares of Pandora fell Monday after the struggling music streaming service announced the replacement of CEO Brian McAndrews with founder Tim Westergren. The change, effective immediately, occurred shortly after recent buyout rumors. Westergren had been the company’s chief strategy officer from July 2004 to February 2014. Meanwhile, Pandora is splitting up McAndrews’ other positions. CFO Mike Herring was named as company president, while Jim Feuille will serve as chairman of the board. Fortune
• PepsiCo promises to go cage-free