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Late last year, a confidentiality agreement was struck between Starwood Hotels & Resorts Worldwide Inc. and Sam Zell’s Equity Group Investments LLC, setting off a flurry of speculation about what the move means. EGI currently owns roughly 14.8 million shares of the White Plains-based company. The agreement, filed with the SEC on Dec. 29, allows for the sharing of information between the two companies regarding the operations and assets of Starwood.

The form also stipulates that EGI will not make an offer for the company without the prior consent of Starwood’s board of directors. A spokesperson for EGI declined to comment on the matter. Repeated calls to Starwood were not returned by press time.

A brief written by C. Patrick Scholes, a senior lodging analyst at Friedman, Billings, Ramsey & Co. Inc. in Arlington, VA, points out that between October 2007 and January 2008, EGI acquired the stock at an average price of $50 a share. On Jan. 13, the stock was trading at around $18 a share.

“We do not know what EGI’s ultimate intentions are,” Scholes writes, “but with the stock price having fallen significantly over the past year, we suspect EGI would be interested in either upping its stake or cutting its losses.” He further states that the renewed interest by EGI “should be a near-term positive for the shares.”

Rod Petrik, a managing director at Stifel, Nicolaus who follows Starwood, says that he doesn’t expect the confidentiality agreement to lead to an acquisition. “Right now, I don’t think there is much in the way of financing, both on the debt or private equity side, for a takeover and I don’t think the company would have any interest in selling anywhere near current share prices,” the Baltimore-based executive says. “Right now, I think it’s an investment and I don’t read a lot more into it than that.”

Chatter about a potential Zell takeover began when his outfit made the initial investment. There was also talk last year about a possible sale to Prince Al Waleed’s Kingdom Hotel Investments, he adds. “There has been a lot of speculation swirling around the stock,” he says. “It’s a matter of Sam dollar-cost averaging. If you like the stock at $50, you have to love it at $18.”

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