BETHESDA, MD-Host Marriott Corp. has closed on its previously announced acquisition of 28 hotels from Starwood Hotels & Resorts Worldwide Inc. The purchase is just one phase of the merger agreement between the two companies that calls for Host to acquire 35 Starwood properties. The price tag for the entire deal stands at $4.2 billion. Host is making the payment with $2.8 billion in stock, as well as the assumption of existing debt and a cash allotment.

Host Marriott also closed on the issuance of approximately 133.5 million shares of common stock of the company to Starwood stockholders. Host Marriott announced that it will change its name to Host Hotels & Resorts, Inc. on April 17, and on April 18 it will begin trading on the New York Stock Exchange under the new ticker symbol HST.

Christopher J. Nassetta, president and chief executive officer, says the firm completed the financing of the cash portion of the transaction “as originally contemplated by completing certain high-multiple asset sales, the formation of a European joint venture and the recent issuance of senior notes.” The properties include hotels under the Sheraton, W, Westin, St. Regis and Luxury Collection brands. They will continue to be managed by Starwood under long-term management agreements.

This first acquisition closing originally involved 30 properties, but the purchase of two of the hotels in the group has been deferred. A new closing date for the two hotels is not clear; however, Host previously scheduled the closing of the acquisition of four additional hotels by May 3, and the final property no later than June 15. Long-term agreements have been instituted for Starwood’s continued operation of the portfolio. Starwood previously elected to remove three Canadian hotels from the original portfolio and reduced the cash portion of the transaction by approximately $276 million, because Starwood was unable to receive a favorable tax ruling.

Starwood shareholders have directly received $2.8 billion or 66% of the proceeds in the form of Host stock valued at $2.68 billion based on Host’s $20.53 closing price on Friday, April 7 and $119 million in cash. Starwood has received approximately $738 million today, $600 million in cash, $77 million in the form of property level debt which Host has assumed and $61 million in Host stock.

The remaining proceeds relate to seven hotels in Europe and Asia, where the closing has been deferred as a result of certain notice periods and consents that have not yet lapsed or been received, according to Starwood officials. These proceeds will be received by Starwood in the form of $661 million in cash and $31 million in the form of property level debt which Host will assume when those sales are closed.

“This transaction represents a major milestone as we evolve our business to balance asset ownership with our fee based business, while continuing to drive growth in our vacation ownership business,” says Steven J. Heyer, Starwood chief executive officer. “We have created a higher growth, more capital efficient and less cyclical business with tremendous balance sheet flexibility to fund growth and return additional value to our shareholders.”

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