First on CNBC: CNBC Transcript: Marriott International CEO Arne Sorenson Speaks with CNBC’s Michelle Caruso-Cabrera on “Squawk on the Street” Today

WHEN: Today, Monday, March 21st

WHERE: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a FIRST ON CNBC interview with Marriott International CEO Arne Sorenson on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET) today, Monday, March 21st. Following is a link to the interview on CNBC.com:http://video.cnbc.com/gallery/?video=3000502902.

All references must be sourced to CNBC.

SIMON HOBBS: STARWOOD HAS JUST ANNOUNCED A SWEETENED MERGER OFFER WITH MARRIOTT. MARRIOTT NOW OFFERING $13.6 BILLION DOLLARS IN STOCK AND OF COURSE AN APPROVED CASH POSITION. OUR OWN MICHELLE CARUSO-CABRERA IS IN CUBA WITH ARNE SORENSON GOOD, THE CEO OF MARRIOTT.

MICHELLE CARUSO-CABRERA: GOOD TO HAVE YOU HERE, MR. SORENSON.

ARNE SORENSON: THANK YOU MICHELLE. GOOD TO BE HERE.

CARUSO-CABRERA: I KNOW YOU'RE HERE TO TALK ABOUT CUBA BECAUSE THAT'S WHERE WE ARE FOR THE PRESIDENT'S VISIT, BUT FIRST WE HAVE TO TALK ABOUT THIS DEAL. PRETEND I'M A SHAREHOLDER. I GET $76 FROM ANBANG OR $21 FROM YOU AND THE PROMISE OF A BETTER SHARE PRICE ON THE COMBINED COMPANY IN THE FUTURE.

SORENSON: WELL IT'S NOT JUST A PROMISE OF A BETTER SHARE PRICE. BASED ON FRIDAY'S CLOSE PRICE WE'RE AT $79.53. AND OBVIOUSLY WE THINK THERE'S GREAT UPSIDE FROM THERE. WE HAVE POWER BY COMBINING THESE TWO COMPANIES TO DRIVE NOT JUST COST SAVINGS BUT REALLY TO DRIVE REVENUE LIFT, IMPROVED HOTEL PERFORMANCE, TO DRIVE COMBINED LOYALTY PROGRAM WHICH IS SECOND TO NONE. AND FOR HOTEL CUSTOMERS WHICH CAN CAUSE THEM TO SAY WHY WOULD I BELONG TO ANY OTHER PROGRAM? WE THINK THAT'S SOMETHING WE UNIQUELY BRING TO THIS BECAUSE WE HAVE ANOTHER PLATFORM TO JOIN WITH IT.

CARUSO-CABRERA: STARWOOD SHARES ARE ALREADY TRADING CLOSE TO $84 THIS MORNING. THE MARKET IS ALREADY DEMANDING MORE THAN THE SWEETENED $79 BID.

SORENSON: WELL --

CARUSO-CABRERA: READY TO DO MORE IF NECESSARY.

SORENSON: ONE CLARIFICATION SO OUR BID IS 79.53. BUT STARWOOD SHAREHOLDERS ALSO RECEIVE A TIMESHARE PIECE WHICH IS BROADLY BETWEEN 5 AND $6 A SHARE. I'M IN CUBA I DON'T SEE WHAT'S HAPPENING IN THE MARKET ON A MINUTE TO MINUTE BASIS, BUT I THINK WHERE THE STOCK IS TRADING IS ESSENTIALLY FACTORING IN BOTH OF THOSE THINGS. NOT MAKING A PRONOUNCED VIEW ABOUT WHETHER OR NOT ANOTHER BID WILL COME IN. WE THINK WHAT WE HAVE TEED UP ON THE TABLE, STARWOOD'S BOARD AGREED ON IT LAST NIGHT, IS A COMPELLING OFFER FOR STARWOOD SHAREHOLDERS. WE WANT TO GET MOVING FORWARD.

CARUSO-CABRERA: ANBANG SEEMS TO HAVE A LOT OF MONEY AVAILABLE TO THEM WHAT IF THEY COME BACK? AT WHAT POINT DO YOU WALK AWAY.

SORENSON: WE'LL TAKE THINGS AS THEY DEVELOP. FOR NOW WE CAN LOOK AT WHAT WE CAN CONTROL, THE STEPS WE CAN TAKE. AND AGAIN WE'RE REALLY EXCITED ABOUT WHAT LIES AHEAD.

CARUSO-CABRERA: SIMON.

HOBBS: ARNE, GOOD MORNING. CONGRATULATIONS ON TRYING TO --

SORENSON: HELLO, SIMON.

HOBBS: THE ANALYST CALL FROM CUBA, NOT WITHOUT ITS TECHNICAL DIFFICULTIES THIS MORNING. YOU BATTLED THROUGH BRAVELY. THE OFFER ON THE TABLE IS 22% HIGHER THAN WHAT YOU CAME UP WITH BEFORE. I UNDERSTAND THAT YOU'VE GOT $50 MILLION OF EXTRA COST SAVINGS IN THERE. BUT TO LISTEN TO YOU, IT SEEMS LIKE THERE'S A FUNDAMENTAL REASSESSMENT OF THE VALUE OF THE BUSINESS. I WANT TO SEE IF YOU COULD RUN US THROUGH EXACTLY WHAT YOU FOUND DURING THESE ADDITIONAL MONTHS.

SORENSON: RIGHT. THERE ARE A COUPLE THINGS THAT HAPPENING HERE. FIRST I SHOULD SAY WE THINK OUR BID IS ABOUT 15% HIGHER THAN THE LAST ONE. BUT THERE ARE DIFFERENT WAYS TO CALCULATE THIS BASED ON WHETHER YOU USE AVERAGE SHARE PRICE OR SPOT SHARE PRICE AND SOME OF THOSE THINGS. I WOULD ALSO ACKNOWLEDGE, AS I DID ON THE ANALYST CALL THIS MORNING, THAT THIS DEAL FINANCIALLY, THE PROPOSAL WE SIGNED LAST NIGHT, IS NOT AS GOOD FOR US AS THE DEAL WE SIGNED AND ANNOUNCED IN NOVEMBER. THE DEAL WE GOT IN NOVEMBER IN RETROSPECT MAYBE WAS JUST TOO GOOD A DEAL. AND SO WE'VE GONE BACK AND OBVIOUSLY THERE WAS A COMPETING BIDDER WHICH SURFACED LAST WEEK. WE SAID WHAT IS A FAIR OFFER FOR US TO PUT FORWARD? WE MADE A SIGNIFICANT MOVE OVER THE COURSE OF THE WEEKEND AND DECIDED WE ARE REALLY VERY INTERESTED IN THE STRATEGIC POWER OF THIS COMBINED PLATFORM. LET'S PUT A SIGNIFICANTLY INCREASED OFFER BUT ONE THAT CAN STILL CREATE VALUE FOR OUR SHAREHOLDERS ON THE TABLE. STARWOOD BOARD'S ACCEPTED IT, WE'RE READY TO GO.

HOBBS: I THINK IT'S FAIR TO SAY HILTON IS STILL REELING FROM WHAT ANBANG WAS WILLING TO PAY FOR THE WALDORF ASTORIA. THEY HAVE VERY DEEP POCKETS WHAT IF THEY COME BACK AGAIN. HAVE YOU SAID TO STARWOOD THIS IS A FINAL OFFER?

SORENSON: NO, WE HAVEN'T. AGAIN, WE'RE NOT GOING TO TALK ABOUT WHAT MIGHT HAPPEN. I THINK WE HAVE TEED UP SOMETHING WHICH NOT ONLY VALUES EXTRAORDINARILY WELL IN THE MARKET TODAY WITH THE CLOSING PRICE ON FRIDAY WHEN COMBINED WITH OUR CASH OFFER, BUT IT ALSO OFFERS A UNIQUE UPSIDE IN THE FUTURE. STARWOOD'S SHAREHOLDERS WILL OWN A SIGNIFICANT STAKE OF THE SURVIVING COMPANY. THEY'LL BE ABLE TO RIDE THE UPSIDE IN THIS PORTFOLIO, WHICH SHOULD BE ENHANCED PERFORMANCE FOR HOTEL OWNERS AND FRANCHISEES AND WE THINK A REALLY BRIGHT FUTURE. THAT'S A UNIQUE PART OF OUR BID.

HOBBS: ARNE A LOT OF PEOPLE WATCHING WANT TO KNOW WHAT HAPPENS TO THE LOYALTY SCHEMES AND I KNOW THEY WILL RUN IN PARALLEL AT THE MOMENT. WHAT'S INTERESTING AGAIN AND AGAIN IN THE CONFERENCE CALL YOU CAME BACK TO THE POWER AND THE VALUE OF THE COMBINED SCHEMES. AT ONE POINT YOU SAID IT WAS YOUR BEST TOOL TO COMPETE IN A DIGITAL MARKETPLACE. AS WE DISCUSS AIR B & B AND THE ONLINE TRAVEL AGENCIES AND THE VALUE TO THE BRANDS OF HOTEL OWNERS MOVING FORWARD, I WONDER IF YOU'RE REASSESSING WHAT THE BUSINESS MODEL IS FOR HOTELS IN THE FUTURE AND THEN SEEING THE VALUE THAT YOU DIDN'T BEFORE IN THE LOYALTY PROGRAMS. CAN YOU RUN US THROUGH THE LATEST VIEW ON THAT?

SORENSON: WELL, THAT IS CERTAINLY A PART OF OUR EVOLVING APPRECIATION OF THE STRATEGY OF THIS. SO WHEN WE FIRST LOOKED AT STARWOOD ALMOST A YEAR AGO AND DECIDED NOT TO PURSUE IT, WE REACHED THAT CONCLUSION IN PART BECAUSE OF THE FINANCIAL ASPECTS OF THE DEAL THAT SEEMED AVAILABLE AT THE TIME. BUT ALSO BECAUSE WE DIDN'T UNDERSTAND AS WELL AS WE DO TODAY THE ADVANTAGE THAT THIS EXTRAORDINARY ECOSYSTEM, THROUGH THE LOYALTY PROGRAM WOULD GIVE US. WE'RE OBVIOUSLY WATCHING IN THE DIGITAL SPACE AND WE SEE IT DEVELOPING QUICKLY. WE SEE LOTS OF FOLKS TRYING TO MONETIZE SEARCH OR TRYING CREATE THEIR OWN RELATIONSHIPS WITH OUR CUSTOMERS, EVEN SOMETIMES SELLING OUR GUEST ROOMS THROUGH THEIR SITES. AND WE THINK WE WILL BE BETTER POSITIONED IF WE CAN HAVE A PLATFORM WHICH IS NOT JUST BIG, BUT ALLOWS OUR CUSTOMERS TO SAY WE'RE GETTING REAL VALUE BY BOOKING DIRECTLY WITH MARRIOTT. THEY KNOW US. THEY UNDERSTAND US. THEY CAN PERSONALIZE OUR STAY. WE KNOW WE CAN EARN POINTS ON A BIG PORTFOLIO OF HOTELS ACROSS 30 BRANDS AND BE ABLE TO STAY AND EARN OR REDEEM WHEREVER WE'RE GOING AROUND THE WORLD AND WHATEVER THE PURPOSE IS OF OUR TRIP.

CARUSO-CABRERA: TO PIGGYBACK –

SORENSON: GO AHEAD, MICHELLE.

CARUSO-CABRERA: TO PIGGYBACK ON WHAT SIMON ASKED YOU IN TERMS OF ANBANG BEING WILLING TO PAY WHAT IT WAS WILLING TO PAY FOR THE WALDORF ASTORIA, IS THERE ANY FRUSTRATION BIDDING AGAINST A CHINESE COMPANY, WHICH BY ITS NATURE, SEEMS TO HAVE IMPLICIT GOVERNMENT BACKING, BY THE NATURE OF THE PEOPLE INVOLVED, BY WHAT IS FROM THE OUTSIDE APPEARS TO BE AN INCREDIBLE DESIRE IF NOT DESPERATENESS BY CHINESE COMPANIES TO GET EXPOSURE OUTSIDE OF CHINA? THEIR INCENTIVES ARE SO MUCH HIGHER IN A WAY THAT SEEM TO PUSH YOU TO PLACES OR TO A PRICE THAT YOU DIDN'T WANT TO GO TO BEFORE AND COULD PUSH YOU HIGHER. IS THAT FRUSTRATING?

SORENSON: WELL, WE'RE HERE IN HAVANA, I'M HERE AS PART OF THE PRESIDENT'S EXPORT COUNCIL. AND I DO BELIEVE, BOTH PERSONALLY AND AS A MATTER OF BUSINESS, THAT WE COMPETE IN A GLOBAL PLATFORM. WE HAVE GLOBAL CAPITAL MOVING IN DIFFERENT PLACES AT DIFFERENT TIMES IN ECONOMIC CYCLES THAT CAPITAL IS MOVING FOR DIFFERENT REASONS AND DIFFERENT RETURN REQUIREMENTS. I WOULD JUST ASSUME NOT HAVE A COMPETING BIDDER SURFACE LAST WEEK IN THE CONTEXT OF THIS DEAL. BUT IT'S NOT FUNDAMENTALLY A POLITICAL ISSUE. IT'S FUNDAMENTALLY A QUESTION FOR STARWOOD'S BOARD AND ITS SHAREHOLDERS TO SAY WHAT'S THE BEST LONG-TERM VALUE FOR OUR SHAREHOLDERS? HOW DOES THIS OFFER COMPARE TO SOMEBODY'S ALL-CASH DEAL IN WHICH THERE'S NO FUTURE? AND, AGAIN, WE'LL SEE HOW THINGS EVOLVE. BUT I THINK THE OFFER WE PUT ON THE TABLE IS COMPELLING. AND I THINK IT IS QUITE DIFFERENT BECAUSE OF THE FUTURE GROWTH PROSPECTS IT OFFERS.

CARUSO-CABRERA: SO WE ARE HERE IN HAVANA. STARWOOD – OH GO AHEAD, SIMON. YOU WANT TO ASK?

HOBBS: YEAH, I DID. SORRY. ARNE, JUST AS FAR AS THE BRANDS ARE CONCERNED. YOU'VE GOT 30 BRANDS NOW. OR YOU WILL HAVE IF THE DEAL GOES THROUGH SUCCESSFULLY. AND THE QUESTION IS ALWAYS IS THAT TOO MANY BRANDS AS YOU KNOW VERY WELL. THE REAL FLY IN THE OINTMENT ARGUABLY IS SHERATON, WHICH WAS NOT GROWING IN ASIA AS IT SHOULD HAVE DONE. IT SEEMS TO ME THAT THE BATTLE LINES ARE NOW DRAWN. YOU SAID ON THE CONFERENCE CALL THAT YOU WOULD REQUIRE EXTRA CAPITAL INVESTMENT FROM THE HOTEL OWNERS. YOU SAID THAT MAYBE SOME OF THE PROPERTIES WOULD BE DE-FLAGGED. ARE YOU COMMITTED TO KEEPING SHERATON WITHIN THE PORTFOLIO OR COULD YOU PHASE IT OUT AND TRANSFER THOSE HOTEL OWNERS TO OTHER BRANDS?

SORENSON: YEAH, WE ARE COMMITTED TO KEEPING SHERATON IN THE PORTFOLIO. WE THINK IT'S A GREAT BRAND. AND IT DOES OFTEN GET QUESTIONS BECAUSE THERE ARE SOME HOTELS, PROBABLY PARTICULARLY IN THE WEST, NOT IN PLACES LIKE CHINA, WHICH COULD USE SOME ADDITIONAL CAPITAL. AND THAT'S WHY PEOPLE ASK. BUT IT IS BROADLY DISTRIBUTED AROUND THE WORLD. VERY WELL KNOWN. IT IS IN FACTGROWING IN ASIA. AND WE THINK THIS BRAND CAN BE POSITIONED TO BE STRONGER THAN IT'S BEEN IN THE PAST. AND WHAT WE SAID THIS MORNING ON THE CALL WAS WE THINK WE CAN IMPROVE THE ECONOMICS FOR THE OWNERS AND FRANCHISEES OF THOSE HOTELS. WE'RE HOPING THAT WITH THE IMPROVEMENT OF THOSE ECONOMICS THEY WILL IN FACT FIND IT RATIONAL AND REASONABLE TO INVEST ADDITIONAL CAPITAL IN BRINGING THOSE HOTELS UP TO STANDARD. AND THOSE THAT DON'T, OVER TIME, MAY END UP GETTING DE-FLAGGED OR LANDING IN SOME OTHER BRAND POSITION. THIS WILL BE VERY MUCH A MULTI-YEAR PROJECT. BUT WE THINK IT'S ONE THAT WE'RE WELL SUITED TO DO AND WE ARE VERY OPTIMISTIC ABOUT THE GROWTH THAT WE CAN RETURN TO SHERATON BOTH IN TERMS OF THE PERFORMANCE OF THE EXISTING HOTELS AND THE ADDITION OF NEW HOTELS IN THAT BRAND.

CARUSO-CABRERA: HAVE YOU HAD A DISCUSSION WITH STARWOOD AT ALL ABOUT THE DEAL THEY SIGNED WITH CUBA AT THIS POINT? DO YOU KNOW ANYTHING ABOUT – CAN YOU TELL US ANYTHING ABOUT THE DEAL WHERE THEY ARE GOING TO MANAGE THREE HOTELS?

SORENSON: YEAH, WELL, BOTH STARWOOD AND MARRIOTT ON FRIDAY OF LAST WEEK GOT APPROVAL FROM THE U.S. GOVERNMENT TO DO BUSINESS IN CUBA. SO THAT IN A SENSE WAS AN EXTREMELY IMPORTANT BIT OF CLARIFICATION. IN CUBA WE OFTEN TALK ABOUT WHAT DO THE CUBANS NEED TO DO IN ORDER FOR AMERICANS TO DO BUSINESS HERE? ACTUALLY, IN THIS INSTANCE, FIRST WE NEEDED THE U.S. GOVERNMENT TO ACT, TO PERMIT US TO DO BUSINESS HERE . STARWOOD HAS BEEN DOWN HERE EXPLORING OPPORTUNITIES. WHEN THEY GOT THAT APPROVAL FROM THE U.S. GOVERNMENT, THEY ALSO SIGNED A DEAL WITH A COUPLE OF CUBAN PARTNERS TO MANAGE, I THINK, TWO HOTELS THAT ARE DEFINITIVE. THEY ARE TALKING ABOUT A THIRD. AND THEY SAY THEY WILL OPEN IN THE NEXT YEAR OR SO. AND THAT IS GREAT. OBVIOUSLY –

CARUSO-CABRERA: BUT DO YOU KNOW – IS IT REVENUE SHARING OR WHAT THE STRUCTURE? WHAT KIND OF STRUCTURE –

SORENSON: I THINK THEY'RE MANAGEMENT CONTRACTS, BUT AGAIN, THEY ARE A SEPARATE COMPANY, AND BY NO MEANS DO WE HAVE DEEP INSIGHT INTO THE TERMS THAT THEY'VE NEGOTIATED. OBVIOUSLY, IF WE ACQUIRE STARWOOD, THAT WILL BE SOMETHING THAT WE WILL LOVE TO TAKE AS OUR OWN. BUT EVEN IF WE DON'T, THIS IS A GREAT STEP FOR THE INDUSTRY. WE HAVE DISCUSSIONS UNDERWAY WITH A FEW DIFFERENT CUBAN PARTNERS. NOW WITH THE U.S. GOVERNMENT PERMISSION WE'RE OPTIMISTIC WE CAN GET A DEAL DONE FARILY QUICKLY.

CARUSO-CABRERA: WHEN YOU SAY THE CUBAN PARTNERS, THAT'S THE GOVERNMENT. YOU ARE DEALING WITH THE CUBAN GOVERNMENT. I MEAN, THEY OWN EVERYTHING HERE.

SORENSON: THE CUBAN GOVERNMENT OWNS EVERYTHING HERE. THAT'S RIGHT. NOW, SOME OF THOSE MODELS WOULD HAVE THE CUBAN GOVERNMENT MAYBE OWN THE REAL ESTATE, MAYBE HAVE ANOTHER COMPANY BE THE OPERATOR OF THE HOTEL. WE MIGHT FRANCHISE TO THE HOTEL. SO THERE ARE A NUMBER OF DIFFERENT MODELS WE NEED TO WORK OUR WAY THROUGH.

CARUSO-CABRERA: WHAT IS IT LIKE DEALING WITH THE CUBAN GOVERNEMNT OR NEGOTIATING WITH THE CUBAN GOVERNMENT?

SORENSON: WHEN I WAS HERE THE FIRST TIME LAST JULY, ONE OF THE CUBAN MINISTERS SAID TO ME – WE WERE TALKING ABOUT THE U.S. COMING TO CUBA – AND I SAID, "WELL, WHAT DO YOU THINK?" HE SAID, "IT'S A LITTLE BIT LIKE THE BLADE OF GRASS ON THE ELEPHANTS." I SAID, "WHAT DO YOU MEAN?" HE SAID, "WELL, WHETHER THE ELEPHANTS ARE MAKING LOVE OR MAKING WAR, THE RESULT IS ABOUT THE SAME." AND I THINK IN A SENSE THAT CAPTURES IT. THERE'S AN INCREDIBLE ANTICIPATION AND AN EAGERNESS FOR THE ECONOMIC DEVELOPMENT THAT IS ASSOCIATED WITH IT. THERE'S ALSO A LITTLE BIT OF A WARINESS. CAN WE MAKE SURE WE CAN PRESERVE – THE CUBANS WOULD SAY – WHAT IS MOST IMPORTANT TO US AND OUR ECONOMIC SYSTEM. AND THOSE THINGS ARE COMING TOGETHER IN A WAY THAT I'M NOT SURE ANY OF US KNOW EXACTLY HOW FAST THEY'LL MOVE AND WHERE THEY ULTIMATELY COME TO REST. BUT THERE IS AN INTEREST, I THINK, IN BOTH SIDES. AND GREATER ENGAGEMENT BETWEEN THE UNITED STATES AND CUBA. GREATER ECONOMIC GROWTH. WE CERTAINLY KNOW AMERICAN TRAVELERS WANT TO COME TO CUBA.

CARUSO-CABRERA: THAT'S FOR SURE. MR. SORENSON, NEVER THOUGHT I WOULD BE INTERVIEWING YOU LIVE FROM HAVANA, CUBA.

SORENSON: THANK YOU VERY MUCH. GLAD TO BE WITH YOU.

CARUSO-CABRERA: PLEASURE TO HAVE YOU HERE. THANKS SO MUCH FOR JOINING US.

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