Starwood Hotels & Resorts Worldwide, a company which operates some of the most powerful hotel brands in the industry, including St. Regis, W and Sheraton, has reportedly hired investment bank Lazard to, as The Wall Street Journal put it, "explore a full range of strategic and financial alternatives to increase shareholder value." This includes the possibility that the company is sold.
The news comes as Starwood reported its first-quarter earnings, which were not especially rosy. Profit fell to $99 million from $137 million a year earlier. Revenue fell 2.9 percent to $1.4 billion. Analysts, on average, expected revenue of $1.46 billion, according to Reuters. Revenue per available room rose a currency-adjusted 5.2 percent at comparable hotels worldwide, but dropped 10.5 percent in Europe.
News of a possible divesture of the company sent The Street into a tizzy. Shares of the Stamford, Conn.-based company shot up more than 8 percent in early trading to a record $87.80.
"No option is off the table, and we will take the time we need to thoroughly evaluate our opportunities and achieve the best result for our shareholders, business partners, and associates," Bruce W. Duncan, Starwood chairman, said in a statement.
WSJ cites a source who said the company is open to the possibility of being acquired, or other alternatives, such as a sale of real estate, acquisition of another company, or of other brands. (Last August, there was speculative rumor that Starwood might acquire IHG as a tax inversion.)
Six months later, Starwood's CEO, Frits van Paasschen, was out, replaced by Adam Aron, who carries the interim CEO tag.
Now, the uncertainty surrounding Starwood as it decides on new leadership "has sparked interest among a number of hedge funds and activist investors," WSJ further writes, including Senator Investment Group and Fir Tree, both of whom have reportedly urged the company to take steps to boost its stock price.
A Reuters piece quotes Stifel Nicolaus analyst Simon Yarmak, who said the most likely outcome is a full-scale sale of the company, listing possible suitors as Hilton Worldwide and the aforementioned IHG—quite a turn of fortunes. Private equity and sovereign wealth funds could also be potential buyers, Yarmak added.
Starwood, which had a market valuation of about $14 billion at Tuesday's close, said it would not make any further public comment until the review was complete.
"The highest probability is that the company markets itself to a long-term 'sticky' buyer like a sovereign wealth fund out of a Middle Eastern country or potentially one or group of investors in emerging markets," FBR Capital Markets & Co analyst Nikhil Bhalla told Reuters.
Starwood has been active of late, most recently launching Tribute Collection, a new soft brand for upper-upscale hotels.