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(Bloomberg) -- Anbang Insurance Group Co. was a surprise entrant when it emerged three weeks ago as the lead bidder for Starwood Hotels & Resorts Worldwide Inc. Its decision to back out of the $14 billion takeover offer was just as unexpected. 

Yet negotiations to buy Starwood were rocky even as they began last year, stumbling for the first time in November and leading the Chinese insurer to walk away, according to regulatory filings and a person with knowledge of the matter.

Anbang’s move Thursday to pull out of the bidding for the owner of the Sheraton, W, St. Regis and Westin brands ends the takeover battle, clearing the way for an acquisition by Marriott International Inc. The Beijing-based insurer, which had partnered with J.C. Flowers & Co. and Chinese private equity firm Primavera Capital Ltd., decided not to proceed because of “various market considerations,” according to a statement.

Back in November, Anbang Chairman Wu Xiaohui rescinded a preliminary offer to acquire Starwood right in the middle of a meeting, after he was pressed to provide written details of the insurer’s financing plans.

It wasn’t until March that Wu and new partners came back to the negotiating table. After twice topping rival bids from Marriott, it looked like the target was almost in his grasp -- and then it all went quiet.

Short E-mail

After several days without contact, on the last day of March came an e-mail to Starwood’s lawyers informing them of a sudden termination of the $14 billion Anbang offer, according to the person with knowledge of the matter, who asked not to be identified as the information is private. The Chinese bidder didn’t provide any reasons, the person said.

Anbang’s abrupt withdrawal for the second time surprised the Starwood board and its advisers. This time around, Anbang’s Wu had answered their concerns. Anbang had demonstrated that funding not only was in place, it was already out of China, according to people with knowledge of the talks. In addition, the Chinese insurer had committed to pay a significant termination fee should any regulatory opposition scupper the deal, the people said.

The short e-mail brought to an end one of the most high-profile bidding wars of 2016 and what would have been the largest Chinese acquisition of a U.S. firm. It also marks a blow to the ambitions of Anbang’s politically connected chairman, who has been notching up purchases from South Korea to the Netherlands after agreeing to purchase New York’s landmark Waldorf Astoria hotel in 2014.

“It’s quite a surprise that they withdrew the offer,” Sigrid Zialcita, managing director of Asia-Pacific research at Cushman & Wakefield Inc. in Singapore, said by phone Friday. “They bit off more than they can chew.”

A representative for Anbang said the company has no comment at this time. Carrie Bloom, a spokeswoman for Starwood, didn’t immediately respond to a phone call and e-mail seeking comment outside regular U.S. business hours.

Global Ambitions

Starwood put itself up for sale early last year after lagging behind larger competitors in expanding the number of properties carrying its brands. It was pursued by about a dozen companies, including Hyatt Hotels Corp. and other Chinese suitors, before Marriott swooped in.

The takeover battle underscored the scale of Chinese companies’ global ambitions. Had Anbang won Starwood, it would have been the largest buyout of a U.S. company by a Chinese investor, topping the 2013 purchase of Smithfield Foods Inc. for $7 billion including debt.

Anbang has been expanding into U.S. hotels, bursting onto the scene with its $1.95 billion acquisition of the Waldorf. The insurer has also agreed to a $6.5 billion purchase of Strategic Hotels & Resorts Inc., an owner of U.S. luxury properties including New York’s JW Marriott Essex House, from Blackstone Group LP. That deal is proceeding as planned, according to people with knowledge of the matter.

The Beijing-based company, founded in 2004, has ranked among the boldest actors in the game, and its pull extends beyond pure business. While many Chinese companies cultivate alliances with relatives of current and former senior officials, Anbang also has links to some of modern China’s most powerful families.

Family Ties

According to China’s Caixin magazine, Wu formed ties with the family of Deng Xiaoping, one of China’s most revered leaders, after marrying Deng’s granddaughter. Caixin has also reported links to the family of Chen Yi, a top military commander under Mao Zedong, as well as to the family of Zhu Rongji, China’s former premier.

Anbang’s departure from the Starwood bidding means Marriott moves closer to an acquisition that would form the world’s largest hotel company, with about 30 hotel brands. Marriott, besides its namesake label, owns brands including Ritz-Carlton, Bulgari, Protea and Moxy.

Starwood shareholders are scheduled to vote April 8 on Marriott’s cash-and-stock offer, valued at $77.94 a share, or $13.2 billion, based on Thursday’s closing price. The value excludes Starwood’s pending timeshare spinoff.

Greater Value

Marriott argued that combining with a seasoned operator would create greater value for Starwood shareholders long term. Marriott’s stock has almost doubled during the four years that Arne Sorenson has been chief executive officer, beating Starwood and the Standard & Poor’s 500 Index by a wide margin.

“Our board is confident this transaction offers superior value for Starwood’s stockholders, can close quickly and provides value-creation potential that will enable both sets of stockholders to benefit from future financial performance,” Starwood Chairman Bruce Duncan said in a statement Thursday.

A merged Marriott and Starwood would gain power in negotiating commissions with online travel agents and be better able to compete with upstarts such as Airbnb Inc. With the deal’s closing, expected mid-year, Marriott would surpass Hilton Worldwide Holdings Inc. to become the biggest hotel company, with about 1.1 million rooms in 5,700 properties.

--With assistance from Steven Yang Keith Zhai and Frederik Balfour To contact the reporters on this story: Jonathan Browning in Hong Kong at jbrowning9@bloomberg.net, Hui-yong Yu in Seattle at hyu@bloomberg.net. To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Sheridan Prasso

©2016 Bloomberg L.P.

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