by Michael J. Shapiro | November 16, 2015

The respective boards of Marriott International and Starwood Hotels & Resorts Worldwide have agreed to a definitive merger, with Marriott paying the equivalent of $12.2 billion in stock and cash for Starwood. The combined company will have 1.1 million rooms across more than 5,500 hotels, with a presence in more than 100 countries. The deal has to be vetted and get regulatory approval before it can be finalized.

Starwood had been seeking a suitor since early this year, but Marriott's name had not been among those recently rumored to be considering the acquisition. Recent buzz, rather, had named Hyatt Hotels as a frontrunner, as well as Chinese hospitality company Jin Jeng. Marriott president and CEO Arne Sorenson earlier this year pointed out that a hypothetical Starwood acquisition would be vastly different from the types of deals Marriott typically has made to grow the company.

Today's announcement, however, touted the benefits of combining Starwood's lifestyle brands and international footprint with Marriott's luxury and select-service brands, as well as its convention and resort business. "The driving force behind this transaction is growth," explained Sorenson in the statement. "This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace. This greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth and enhance long-term value to shareholders. Today is the start of an incredible journey for our two companies."

Sorenson told the Wall Street Journal that Marriott and Starwood haven't started the process of antitrust review yet. Sorenson also told the newspaper that Marriott owns about 10 percent of the hotel rooms in the U.S., while Starwood has a market share of between 3 percent and 4 percent, so the combined company would account for less than 15 percent of the U.S. hotel supply, adding that in the U.S., the hotel business is a "highly competitive and dispersed industry."

Starwood's chairman of the board of directors, Bruce Duncan, said that during the review process it became clear that Starwood's brands were much admired in the industry. "Our board concluded that a combination with Marriott provides the greatest long-term value for our shareholders and the strongest and most certain path forward for our company," he concluded. 

Marriott estimates that by leveraging operating efficiencies, the combined company will save at least $200 million in the second full year after the closing, which is expected to be finalized in mid-2016. Additionally, Marriott will work more aggressively to grow the Starwood brands internationally. Arne Sorenson will remain president and CEO of the company following the merger, and the board of directors will grow from 11 to 14, adding three members from the current Starwood board.