On Monday morning, Marriott International announced it was buying Starwood Hotels & Resorts for more than $12 billion in a mostly stock transaction. And while the merger will create the world's largest hotel company, both Jim Cramer and investors were confused by this transaction.
Starwood is the home of hotel brands such as Sheraton, Westin, St. Regis and Le Meridien, among others. It has been trying to sell itself for some time, and on Monday that deal was finally announced.
Typically in a takeover situation, Cramer would expect the target stock to go higher. That was not the case here; Starwood's stock lost 4 percent in Monday's session, which indicated that Wall Street did not warm to the deal. The terms of the deal stipulated that shareholders would receive 0.92 shares of Marriott, and $2 for each share of Starwood. Separately, Starwood shareholders would receive an additional $7.80 from the spin off of its timeshare business.
Given that Starwood's stock closed at $75 on Friday, Cramer worried that it was undervalued. Why would management accept such a deal?
To get the inside take on the benefits that the merger of these two companies could bring, Cramer spoke with Arne Sorenson, CEO of Marriott International, and Adam Aron, the interim CEO of Starwood.