STAMFORD, CT—Starwood Hotels & Resorts said Wednesday that it had hired Lazard to help it explore “a full range of strategic and financial alternatives to increase shareholder value,” including a possible sale. Bloomberg Business reported that shares of the hotelier rose following the announcement, which coincided with a disappointing first-quarter earnings report.
Calling it “a time of enormous opportunity and change in our industry,” Starwood chairman Bruce W. Duncan says “no option is off the table.” He adds that “we will take the time we need to thoroughly evaluate our opportunities and achieve the best result for our shareholders, business partners and associates.”
The strategic and financial review has just gotten underway, Starwood says, “and no assurance can be given as to its outcome or timing.” The company, whose brands include Sheraton, St. Regis and W Hotels, will provide no further public comment regarding the review until it's completed.
Starwood Capital Group CEO Barry Sternlicht, who founded the hotel company in 1995 and led it for 10 years, told Bloomberg Television Tuesday that he didn't anticipate a leveraged buyout of Starwood Hotels. “It's not really leverage-able,” Sternlicht said Tuesday. “Even a private equity player can't really lever the company. You have to put a ton of capital out.”
That being said, Sternlicht pointed out, “It's not been the best performing of hotel stocks. I think if they don't get the stock up, somebody's going to make a move on them.” He suggested a purchase by a sovereign wealth fund as one possible scenario. “If your alternative is bonds, everything looks yummy,” Sternlicht said of commercial property's yields relative to other vehicles.
In February, CEO Frits van Paasschen resigned by mutual agreement with the board, reportedly after months of behind-the-scenes wrangling, although Duncan told Reuters that Paasschen's resignation “has nothing to do with any disagreement over strategy.” A search is underway for his replacement; director Adam Aron was appointed interim CEO in February.
Starwood Hotels on Wednesday reported that although worldwide RevPAR increased 5.2% year-over-year in Q1, earnings per share slipped to 58 cents from 71 cents the year prior. That compares to the 25% Y-O-Y increase in EPS at Hilton Worldwide Holdings, which reported Wednesday that its same-store RevPAR worldwide increased 6.6% in Q1 from the year-ago period.
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