In an unexpected bidding war for Starwood Hotels & Resorts (NYSE: HOT), Marriott International, Inc. (NYSE: MAR) came out on top against China’s Anbang Insurance Group with a deal worth $13.6 billion.

The deal was months in the making. Marriott first put in its bid back in November 2015. But in mid-March, out of the blue, a Chinese consortium led by Anbang slipped in a bid of its own. And it was a whopper.

#-ad_banner-#The consortium’s proposal equaled a value of $83.67 per share, heads and shoulders above the Marriott bid, valued at $71.00 per share.

Suddenly, Marriott was sent scrambling to hold on to what could be a great growth opportunity.

Starwood owns such well-known brands as Weston and Sheraton. As of the end of 2015, the company owned or managed 1,282 hotels and 15 vacation resort properties in over 100 countries. Interestingly, on March 19, Starwood signed three hotel deals in Cuba, making it the first U.S.-based hospitality company to enter the market in nearly 60 years.

Marriott, on the other hand, is nearly three times Starwood’s size, with more than 4,400 properties across 87 countries. The tie-up with Starwood will give Marriott access to more countries. The acquisition also means substantial cost savings: up to $250 million a year! That’s about 17.5% of Marriott’s operating cash flow, according to its latest financial statement.

Arne Sorenson, CEO of Marriott, said in the press release, “We are even more excited about the power of the combined companies and the upside growth opportunities. We are also more confident of achieving our updated target of $250 million of cost synergies.”

While acquisitions normally cause the acquired company’s share price to pop (and it has), this could be a great time to pick up shares of MAR to take advantage of the expansion into new markets and the cost savings the tie-up will bring.

Why?

Well, Marriott’s picking up Starwood on an upswing.

In 2015, Starwood signed 220 new hotel agreements, which is a record number. RevPAR, which is revenue per available room, also increased across all six regions in which Starwood operated. The company opened 105 hotels and resorts, which added 21,500 rooms to its roster.

Starwood’s CEO Thomas Mangas said in the company’s earnings report, “As we prepare for the merger with Marriott, our priorities in 2016 will build on this success — accelerating our growth, developing our talent, innovating across our brands, and delighting our guests to grow our RevPAR faster than the competition and deliver superior returns to our owners.”

Indeed, earnings growth at Starwood for the past five years was an average 12.96%.

It’s no wonder Marriott wanted to snag Starwood off the market… right from the jaws of a Chinese-led consortium that offered a very compelling bid. In response to Anbang’s bid, Marriott increased its offer.
Here’s what Starwood had to say about Anbang’s bid, in a statement on March 21:

“In connection with the amended merger agreement, Starwood’s Board of Directors has determined that the Consortium’s proposal no longer constitutes a “superior proposal”, and therefore under the merger agreement Starwood is no longer permitted to engage in discussions or negotiations with, or provide confidential information to, the Consortium. Starwood’s Board unanimously recommends the amended merger agreement with Marriott to Starwood’s stockholders.”

Marriott’s revised bid equaled a value of $85.36 per share, a jump of more than 20% from its original bid, and slim 2% besting of Anbang’s bid.

What Starwood liked better from Marriott was its commitment to growing its brands. And Marriott has the cash and the established reach in order to leverage the merged company’s growth potential.

That makes Marriott an interesting investment prospect.

The combined company will be the largest hotel company in the world, making it unparalleled in upscale brands and sheer number of rooms.

Marriott’s no stranger to growth, either. Over the past five years, earnings have grown an average of 22.31% a year! The next five years could see more of the same, with analysts expecting earnings growth of 19.9% each year. That beats the industry average of 6.11%.

And this kind of large and steady growth has translated to significant returns for investors.

Share prices have averaged more than 20% growth a year over the past five years… and that’s after a significant pullback in 2015.

Risks To Consider: As with any merger or acquisition, this one will have to be approved by both Marriott and Starwood stockholders. This should happen around April 8, 2016, but it’s by no means a formality.
The agreement also depends on Starwood spinning off its timeshare business. It must do this before any merger can even be considered. If there’s a hiccup in this process, expect the merger process to be impeded.

Action To Take: Marriott was on a strong growth path before the Starwood merger appeared on the horizon… But with the agreement comes access to new markets, including the exciting Cuban project. Add Marriott to your portfolio at or below $71 to take advantage of double-digit earnings growth for the next five years.

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