Starwood explores its options including sale

Starwood, one of the best known names in the hotel industry, is considering a sale.

The owner of high-end hotel brands, including St. Regis and Sheraton, said on Wednesday that it had hired Lazard to "explore a full range of strategic and financial alternatives" to increase shareholder value.

"No option is off the table, and we will take the time we need to thoroughly evaluate our opportunities and achieve the best result for our shareholders, business partners and associates," said Bruce Duncan, Starwood's chairman.

Shares in Starwood, which have climbed 15 per cent in the past year, rose 8 per cent by lunchtime in New York, valuing the group at nearly $14bn.

The news comes after talk that Starwood was under pressure by activist investors to merge with InterContinental or Wyndham.

"We believe a sale of the company is the most likely outcome, rather than a merger with a competitor," wrote Nikhil Bahalla, analyst at FBR Securities, in a note. Starwood has been a hotly discussed name in recent weeks as investors speculated over its game plan, he said.

The Connecticut-based company has been mired by shuffles in leadership: Frits van Paasschen, chief executive, resigned in February after seven years at the helm and the company is still searching for a permanent replacement.

Under Mr Paasschen's lead, Starwood has focused on global expansion, forecasting that 80 per cent of its rooms would be outside the US by 2016. But the company has been hurt by a global economic slowdown, with revenue abroad lagging behind that of the US.

Starwood also unveiled a sharp drop in first-quarter profits on Wednesday.

For the three months ended March, revenue fell 2.9 per cent to $1.4bn from the same period a year before. Meanwhile Hilton, one of the company's main competitors, reported a 10 per cent jump in first-quarter revenues.

Starwood's net income tumbled by nearly 28 per cent to $99m, or 58 cents per diluted share, as the stronger dollar ate into its overseas earnings.

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Starwood warned that it could take a $45m hit on its full-year earnings for this year if current exchange rates stay the same.

It expects the currency headwind to reduce second-quarter earnings by $15m.

Earlier this year, Starwood announced plans to spin off its timeshare business - vacation properties with shared ownership - into a separate publicly traded company as part of its so-called "asset-light strategy" to sell off properties.

Some saw the move as a bid to make the business a cleaner takeover target.

While Starwood returned more than $2bn to shareholders last year, there has been frustration about communication on capital allocation and growth strategy.

Starwood said on Wednesday that it had just started the strategic review and would not be making further comments until the review was completed.

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