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Marriott International is to acquire Starwood Hotels and Resorts creating the world’s largest hotel company.
The combined firm, which will include the Sheraton, W Hotels and Ritz-Carlton brands, will operate or franchise 1.1 million rooms in more than 5,500 hotels.
Marriott will pay $12.2 billion for the acquisition in a cash and shares deal.
The announcement brings to an end speculation over who will buy Starwood, with Hyatt Hotels linked to a purchase earlier this year.
Arne Sorenson, president and chief executive officer of Marriott International, said: "The driving force behind this transaction is growth. 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.”
Bruce Duncan, chairman of the board of directors of Starwood Hotels & Resorts Worldwide, added: "During our comprehensive review of strategic and financial alternatives, it was clear that our talented people, world-class brands, global leadership and spirit of innovation were much admired and key drivers of our value.
"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.
"Starwood shareholders will benefit from ownership in one of the world's most respected companies, with vast growth potential further enhanced by cost synergies."
Read an interview with Sorenson where he discusses brand value, potential growth and targeting travellers direct.