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Marriott International has hit another bump on the rocky road to acquiring Starwood Hotels & Resorts Worldwide. Having already outlasted Anbang Insurance group in a four-week bidding war, Marriott's latest hurdle surprisingly comes from within Starwood's ranks.
Dream Team Hotel Associates LLC, owner of the Westin Times Square in New York, and Cityfront Hotel Associates Limited Partners, holders of the Sheraton Grand Chicago, filed suit against Marriott International and Starwood Hotels in a New York state court earlier this week, claiming the merger will adversely affect their businesses.
The complaint alleges that the Marriott takeover would violate the terms and conditions of the plaintiff's contracts with Starwood, which contain radius-restriction clauses prohibiting:
“any other hotels within a certain delineated geographical region of Chicago and New York City (with certain specified exceptions).”
The areas of protection, (AOP), in Starwood's contracts with Sheraton and Westin state that Starwood cannot own or operate competing hotels within the specified zones. The suit from the hotel owners argues that, if acquired by Marriott, the two hotels would likely suffer financial damages.
It's the second time that Marriott's purchase of Starwood has looked a ‘sure thing' only for the deal to be held up by an unforeseen complication.
Sheraton and Westin are 2 of the 10 brands Marriott will add to the 19 it currently operates if the merger goes ahead, creating the largest hotel operator in the world. The Marriott-Starwood merger is set to close mid-year but with legal challenges going through the courts, it will be interesting to see if it stays on schedule.
Spokespeople from both Marriott and Starwood declined to comment on the suit.
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