Marriott-Starwood Merger Conference Call: Full Transcript

Ticker: MAR Company: Marriott International, Inc. Event Name: MAR And HOT Sign Amended Merger Agreement Event Date: Mar 21,2016 Event Time: 08:00 AM ET Operator: Good morning ladies and gentlemen and welcome to the Marriott International Conference Call. My name is Renon and I'll be your Coordinator for today's conference call you will be on listen-only. However at the end of the call you have the opportunity to ask questions. If it anytime need assistance please press star, zero on your telephone keypad and you will be connected to an Operator. I will now hand over to your host Leeny Oberg Marriott's Executive Vice President and Chief Financial Officer to begin today's conference. Kathleen K. Oberg: Chief Financial Officer: Good morning. Thank you all for joining us, from such quick noted. Joining me today is from Cuba is Arne Sorenson Chief Executive Officer of Marriott International and beside I am joined by Laura Paugh, Senior Vice President IR and Betsy Dahm, Senior Director IR. As always before we get into the discussion today let me first remind everyone that many of our comments facts and are considered forward-looking statements under Federal Securities Laws. These statements are subject to numerous risks and uncertainties, as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release that we issued this morning, along with our comments today, are effective only today, March 21, 2016, and will not be updated as actual events unfold. To begin, with Arne had some opening remarks. Arne M. Sorenson: President and Chief Executive Officer: Thanks Leeny and thanks to all of you for joining us on such short notice. So, let's get started, today we are announcing Starwood's acceptance of our revised bid to acquire Starwood Hotels and Resorts. We had outlined our interest in Starwood over the last five months in presentations and in our proxy statements. In the further diligence we've completed in last five months, we've become even more convinced of the tremendous opportunity presented by this merger. That confidence is reflected in our higher offer. We now believe there are more cost synergies and we estimated in November. We are also helped by more efficient deal structure with the greater percentage of cash, and finally we were helped by a modest recovery in our stock value in recent weeks. As the disconnect between stock performance and hotel fundamentals considerably. To go through the terms, I'd like to turn things over to Leeny. Kathleen K. Oberg: Right, for those of you who maybe following on the slide at that we out will on Slide three and as Arne mentioned our new deal with Starwood has a meaningfully higher cash component to it, we've increased the cash consideration from $2 per share to $21 for every share of Starwood common stock. Also been revised deal we have a new exchange ratio of 0.8 shares of Marriott common stock to Starwood common stock. This basically takes us to issuing roughly $20 million pure shares or about 14% pure shares of Marriott than the original agreement. This makes our total consideration to Starwood shareholders of $79.53 per share, not including the value of the time share of business, based on last Friday's close, for a total of $13.6 billion. After we've had extensive due diligence and spending a lot of time with the Starwood team and joint integration planning, we increased our targeted Annual G&A cost synergies to $250 million up from $200 million and excluding any benefit from even more incremental cost savings beyond the 250 and additional revenue synergies which we're confident we will provide we expect adjusted EPS to be roughly neutral in 2017 and 2018. We expect to retain our investment grade rating with our strong cash flow generation and we're committed to that end. In terms of the process and where we go from here, we'll be updating our Form S-4 with a Form 8-K by the end of this week, we expect to file that in a couple days. We'll have a special stockholder meetings rescheduled for April 8. The record date will remain February 2, but we'll now have the stockholder meetings on April 8. As most of you know, we have cleared the pre-merger antitrust review in the U.S. And Canada and the process is for approvals from the EU and China are on their way and currently pending. At this time we still continue to believe that the closing would be in mid-2016, and now in terms of talking about the overall highlights from this transaction, I am going to turn it back over to Arne. Arne M. Sorenson: So as we talked about in November and we have chance to talk with many of you about in the months that follows, we're excited about this for a number of great reasons, obviously the merger of these two Companies will create the world's largest lodging Company with about 5700 hotels around the world and $1.1 million rooms. A big is obviously good but better is better and really what we are focused on is not just the size but we're focused on the breadth of choice that we offer to our customers and the power of some of the platforms we can build. That starts with the 30 brands that the two companies held already in the market place they include particularly strong positions in luxury and lifestyle and of course for our distribution around the world. We think that we'll find economies Kathleen K. Oberg: Riyanon, I don't know if you can hear us from our side we've lost Arne. Operator: The Arne's line is disconnected, I will try my best to get back on the line now. MAR: Alright. We will continue on in his absence. Kathleen K. Oberg: Right. So we are still for those of you who our on the deck on Slide five and as Arne was talking about that the economies have scaled from this combination will allow us to compete meaningfully better in today's world with technology disruptors. We also think the combination of Marriott rewards and Starwood's preferred guests to create a really powerful loyalty program, that will be the best in the lodging industry. With significant revenue and cost synergies that really stretch both for the combined company as well as for the property level hotels. We will continue to have attractive financial profile with an investment grade balance sheet and significant cash flow. Now what we're going to do is walk a little bit through each of the opportunities where we see tremendous opportunity create value. Kathleen K. Oberg: Hello. Arne M. Sorenson: I am back on. Can you hear me? MAR: We can here you Arne. We're at the Slide six Arne, if you would like to start it there. Kathleen K. Oberg: We're at the top of opportunities to create value. Arne M. Sorenson: Why don't you finish. Leeny, go ahead and finish Slide six. I'll get up on seven. Apologies everybody. Kathleen K. Oberg: Alright, thanks. No, that's alright. So, as we were talking where we see some unique opportunities to create value, which we'll talk a little bit more in detail or across a wide variety of areas of our business. First of all, in Enhanced loyalty programs, we will dramatically increase access to new customers, creating opportunities for new partnerships, and provide greater competitiveness by having such a big platforms. On the sales integration side, there is really kind of benefits for both sides there is exposure to Starwood's brand-loyal, and affluent guests, and also benefiting the Starwood hotels through our expertise in corporate group and mid-market accounts. There are also benefit for the Marriott hotels with been able to make sure to connect with all of Starwood's customer base. On the 30 brands we are confident that we can position them against distinct and profitable customer segments and we'll take you through some of our thoughts there. We've also through our work with Starwood gains greater confidence in achieving the G&A cost synergies similarly with working with them our view of being able to accelerate rooms growth in certain under penetrated market. With this -- the similar business models of the two Companies we're confident of been able to maintain our attractive balance sheet and produce meaningful significant cash flow on a sustainable basis and also true the building of these two companies enhancing the competitiveness of Starwood's brand. With that we will turn to the loyalty program and Arne, we're on Slide 7. Arne M. Sorenson: This is okay on Slide 7. This is really about the loyalty programs and as we've talked about this is one of the most profound advantages we think of this merger. We believe that initially with loyalty programs will run them in a parallel way, Marriott will rewards an SPG. Kathleen K. Oberg: Riyanon I think we have lost him. Operator: Arne's line is still connected to our end. Arne M. Sorenson: Operator: Yes. Arne M. Sorenson: Longer term we will look for a combined platform. We will take that this will generate a hotel loyalty program that truly needs everything a hotel gas could want and believe we can position this program so that customers can conclude as really no other program that they need to remembers us. In size in choice and in recognition we can provide to our guest we think this loyalty eco system gives us the best tool we can possibly have to compete in the digital marketplace. Well there be strength in every segment of the lodging industry, luxury and lifestyle will be key areas of strength. We will also bring our expertise to frequent business travel to this large global program and with the advantages of investing in only one platform, we expect to be able to accelerate spending not just on the infrastructure but on tools that will know our customers better and to personalize our relationships with them, and of course a strong program will open up more partnership opportunities, including with our great credit card partners, core brand credit card partners. On the sales force which Leeny talked about briefly, we think that we can create a sales force which is stronger and more efficient because of the power of these two platforms. That is bringing of course the Starwood guest which typically quite loyal to SPG and skews a bit towards the lifestyle and the younger consumer. We think with St. Regis we will have another strong brand in the luxury space, with the luxury global sales team is better on the world that can service that particularly demanding customer. And then we've got great tools on the Marriott side as well. We got a Marriott's Convention and Resort sales network which sales resorts for meetings and for other events and we would use that across a broader platform and we've got great relationships with our corporate accounts that we can continue to streamline and make work better, and so we think we will have both greater coverage across more companies and more efficient coverage as we go forward. Leeny, I am getting some noise on my phone, is it coming across on the call as a whole. Kathleen K. Oberg: No, it sounds good Arne. Arne M. Sorenson: Okay, great. So, let's go to Slide nine, on brand integration. You'll be pleased to know we're not going to talk about all 30 brands on this call. But generally we have looked at the brand line up and we see a lot that we like I think all of you have asked in one way or another way that 30 brands are too many but it's important to note that these 30 brands are already competing in the marketplace with strength and with awesome sizable distribution. As we look forward we think St. Regis will be our brand that we've continue to grow and probably and its growth accelerate. It can be positioned in a place that is St. Ritz-Carlton and it can be another brand that we can use in the fast growing luxury tier around the world probably particularly in Asia. W is a brand with great momentum and great customer awareness and connectivity, we very much expected to continue to see it grow. It is a very very strong brand with many luxury hotels across the world and generally we would expect to position it just a little bit below EDITION obviously W is a meaningfully bigger brand and EDITION we expect to see it continue to grow. With Element we have a lifestyle extended stay brand which is a space that Marriott has no brands, we think there is a consequence this will be a brand that grows quite quickly post-merger. We also taking Element could be an interesting alternative to some of the housing rental services shared economy platforms like Airbnb and some others and then we've got an interesting person between AC by Marriot and Aloft, both brands compete in the upscale space both we would describe as lifestyle entrance into that space both have meaningful momentum. But while they are position in some respect similarly in terms of the segment, they have different personalities. We tend to think AC hotels has been a well the European lifestyle approach and Aloft has been a bit more we think their customers that are gone to each of the two as there will be owners and franchises drawn each of the two. We'll talk a little bit about cost synergies this is now on page 10 for those of you are following along. We've been working intensely since we announced this deal in November to prepare for integration and of course to understand each other's organizations and structures and start to think about how to melt those into one organization. Our teams have been working across the world, both at headquarters and on property levels that been around the world and in continents to understand the way of going about doing business and based on that work we are now confident that we can achieve cost synergies of $250 million up $50 from what we talked about in November and we believe those synergies can be fully achieve by the time we get to calendar 2018 if not before. On Unit growth opportunity, we think there are number of places where we can accelerate growth in the Starwood portfolio, first we should comment the Starwood team for the growth that they have already accelerated over the course of the last year or so, it's great to see that and it's great to see the momentum that's already underway. But again we think that with the relationships we have with ownership, franchises around the world with the development team that we have all around the world and with the proven track record we have for growth, we can bring that growth to St. Regis in the luxury space we look at what's happened with the luxury collection and compared that on launched of the Autograph Collection just about five years ago, a brand which already has a 100 hotels and we think we can bring similar kind of growth to the Luxury Collection. When you think about Aloft and Element, which I have talked about from the brand positioning perspective, we think into the select that we've have got we have signed over 50,000 rooms last year that we will see both of these brands accelerate their growth as well. And then let's talk about the balance sheet a little bit. We obviously have moved a significant part of the consideration been offer to Starwood shareholders from equity to cash. We have talked about this with some of you before and everybody in the transacts goes at yearend earnings call. To some extent we regretted the high use of equity in the deal that was announced in November but believe that the time that was the best way to position ourselves to have accepted by Starwood. Now with the opportunity that was presented in the last week we have the ability to increase our bid but while we bid it to shift more of the consideration to cash and away from equity. Cash is obviously a cheaper currency for us to use it does drive a bit higher debt level at closing we think roughly will be between 3.5 times to 3.6 times Adjusted debt to Adjusted EBITDA at close. But given the power of the cash generation machine that these companies would present we believe will be well within our 3.0 to 3.2 times a bit by year 2016. We are very much committed to returning to the Marriott Model which is an Asset-light strategy, high cash-flow production and a return of that cash flow to our shareholders to the extent they are not compelling opportunities to invest in our business and as consequence we think we will quickly get back to the kind of higher ROIC and high capital return model that we've had in the past. In terms of the brands, Sheraton obviously has been something -- we've been asked about Sheraton a number of times and it's particular interest I think before talking about that brand specifically, we should say generally, that our notion here is that we can bring the RevPAR index of the Starwood brands closer to the RevPAR index that the Marriott brands have and again that will be two tools like this powerful loyalty program, like the sales force that we've talked about. But also hotel distribution brands strength and the operation tools that we can bring to us. As a consequence we think we will drive both top-line and margin performance for our hotel owners, which obviously should help their economics for existing hotels and should make us more attractive from the hotel perspective. As it relates to Sheraton, we are encouraged by the that Starwood put together last year. We think there are great tools in that to begin to drive a stronger and brand with more momentum for Sheraton. We think that generally the revenue lift and cost savings that we've talked about should improve brand economics for our hotel owners and with those improved brand economics we're optimistic that more renovation capital can be encouraged to improve the benefit -- the performance of these hotels. While at the same time recognizing that some of the hotels which are pulling the brand back, will overtime have to be de flagged as Sheraton those are important conversations to have with owners and franchises that cannot happen with new standards over 90% something that we jointly have to pursue, but I think with the long-term focus we are optimistic that this is a space we've been in before with our owners and we can a plan which is very much to their benefit in long-term. I think before we go to questions. Leeny will talk just briefly about our core to date numbers and our perspective about how business is. Kathleen K. Oberg: Thanks Arne. In a separate release today Marriott announced that we've reiterated guidance for comparable system wide RevPAR growth of 2% to 4% for the first quarter and 3% to 5% for the full year. A year-to-date through February, we saw constant dollar RevPAR at our comparable system wide hotels increased 3.4% in North America, 3.9% outside North America and 3.5% worldwide. Couple comments overall, is that the manageable service hotels performed particularly well year-to-date rebounding from some renovations and with some great group out performance. Outside the U.S. We have seen very nice performance in Asia Pacific and although Europe still perhaps lower growth and we would like to see still a bit stronger than expected not surprisingly in the Middle East we've continue to see a struggle there. With these numbers through the first two months of the year we still what obviously expect March to pull it down a bit given Easter but again we continue to feel comfortable with the 2% to 4% range for Q1 and towards the upper end of 3% to 5% for the full year. We also expect that on growing our rooms that we expect that grows worldwide rooms will increase 8% total but 7% net for the full year. We're pleased with what we've seen so far on both openings and signings and just kind of from a perspective from the whole industry in the U.S. We continue to see that mid travel projecting that on demands side that growth will be higher in '16 and '17 and with supply still under a long-term average of 2 to -- little bit over 2, and with that we'll turn it over Riyanon for questions. Question & Answer Operator: Thank you. Ladies and gentlemen if you would like to ask a question, please press star, one on your telephone keypad now. If you change your mind and wish to withdraw your question please press star, one again. You will be advice when to ask your question. Our first question comes from the line as Felicia Hendrix from Barclays. Please go ahead. Felicia Hendrix: Barclays Capital: Thank you. Good morning everybody. So, the your full kind of prepared remarks, I think what set up to answer this question. I will ask on, it does sound like there is a bit of strategic change since you first announced this transaction the way it was positioned originally that this was opportunistic and originally walked away in April it has done twice. So, just wondering in light of the offered is obvious but if you could just kind of talk about strategically, what really had change the beside and coming in with the higher offer. Arne M. Sorenson: Good morning Felicia. Felicia Hendrix: Good morning. Have you on the call. I think in many respects the strategy has not change but it does continue to evolve. So, when we -- as we said in November when we start at looking at Starwood nearly a year ago. We were less interested strategically than we were by the time we got into the process in October and obviously signed it be on November and I think initially we did not appreciate as much as we do today the power that could be driven by a particularly the combined loyalty platform and this benefits our customers within that loyalty platform. By the time we got October we obviously also saw a deal which was amazing financially and I think in some respect you can look back at that and say maybe in fact the deal was almost too good which is potentially what drew another bidder in here at the last possible moment and so obviously we have spent lots of time in the last week talking through what the right response is, really measuring whether or not the value can be created for our shareholders in continuing to pursue this deal and we are absolutely convinced that the power of this merged platform fully justifies what we've offered. The state the obvious it's not as good a deal as the deal we were about ready to go down and close at end of March before the new offer came in. But it's still a deal that we are very excited about pursuing. Felicia Hendrix: That's helpful. Can you just help us maybe on you or Leeny, does this new deal or the new structure affect your current guidance for buybacks this year? Kathleen K. Oberg: Well yes. From the standpoint knowing that we're going go up to probably get close to the 3.6 times on our leverage ratio, we would expect that we want to bring that down to between our three and three quarter levels by year end. I will say this would our current model would still show us buying back a nice little chunk of shares in the back half for the year even with doing that but yes it would change a bit I would also point out though that we are going to be issuing pure shares in this transaction which will also help tremendously and that kind of equals out these equation. Felicia Hendrix: Great. Arne M. Sorenson: If anything the new structure of this deal is like an advance share repurchase of $3.6 billion with the start. Felicia Hendrix: Yeah, make sense and then just understanding the dilution and accretion, is this dilutive in 2016. Kathleen K. Oberg: We expected to be roughly neutral to EPS. I am sorry it's a 17. Right. In '16 I would expected to be slightly dilutive. Felicia Hendrix: Okay. Thank you so much. Operator: Our next question comes from the line of Tom Allen from Morgan Stanley. Please go ahead. Thomas Allen: Morgan Stanley: Hey, good morning. So, two questions on the synergies. One can you talk a little bit, in little bit more detail about what maybe quantify what else you found to get from the 200 to 250 of cost synergies? Second question is you talked about getting storage brands closer to 113% RevPAR index, I don't that's included in the synergies. So, can you talk about maybe somewhat incremental outside you could generate from that ? Thanks. Kathleen K. Oberg: Well, I'll start on the G&A side and Arne you can finish up where you would like. But on the G&A side I think one of the benefits of our time with Starwood over the past four months is being able to continent by continent, discipline by discipline go through and look at the way that they are structured in a way that we're structured to look at how responsibilities are going to be carried forward. One of the benefit we've got in combining these two companies is we're going to leverage our continental structures tremendously by adding a lot of hotels to their system which if you think about it from an incremental flow through just on the continent admin side is tremendously helpful and then when you look at the fundamental corporate disciplines in many cases we're adding volume to structures that are already in place in terms of finance, HR, just basic structures of running the company where a lot of them are fixed cost where we're not going to have to add a whole lot of people to add-on the business. So when we went department by department and area by area as you may remember we had always said we were expecting to do at least $200 million and I think our homework has allowed us to feel comfortable with committing to $250 million. Thomas Allen: With respect to the hotel top line and margin performance this is an area that I carry in my briefcase actually about it doesn't very specific ideas for each one of those which we are optimistic will be able to achieve but because we are still competing with each other until this deal is closed we will continue to compete we have not had a chance to go through Starwood's hotel level P&L for example and sit down and compare them side by side is discuss already our business but we do know that there are areas like procurement there are a number of system areas where we can combined two system into one and share the cost across the broader platforms and therefore deliver efficiencies to hotels and we also know that there are opportunities to the loyalty programs and through the sales force to drive incremental share for those hotels so we are quite optimistic and have set targets that would apply across the organization to drive in both top line and bottom line improvement for our hotel owners and franchises. That will in turn drive an increase in frees for us that is not factored in, I think there are two reasons where we've not factored that in; one is we have not completed for the reasons described the full analysis that allows us to be specific and often reliable enough in that, and second that some of those things will be quicker than others, I think something we can probably start to deliver within a few quarters after closing some of them will be more of a few year trying to project before we really deliver those results. Thomas Allen: Hopeful, thanks and just quick follow-up and so you are RevPAR year-to-dates I am trying to add 3.4% in the US, if we look at the Star reports I think approx. scale that closer to what's driving that out performance and do you expect that to continue throughout the year? Thanks Kathleen K. Oberg: So, again I'll start and then Arne if you free to feel in. First of all, as I mentioned before we definitely seen a good rebound from a number of renovations that we are excited about at our hotels as well as our group out performance, what we're seeing for group for the rest of the year actually looks like growth over 8% for the remainder of the year. So, we feel very good about how that segment of the business is performing and we are seeing some improving trends on the trending inside as well MAR: And Thomas keep in mind that, FCR data is non-comp hotel the data we produce is comp hotels and so you do get variances from time to time of this nature. We have been very happy with our share, with our RevPAR index year-to-date been terrific in performance for our brands. Thomas Allen: Great. Thank you very much. Next question comes from the line of from the line of Ryan Meliker, from Canaccord Genuity. Please go ahead. Ryan Meliker:Canaccord Genuity: Hey thanks for taking my question. I just had a couple of question regards to how you guys are thinking about the back and forth with Starwood and obviously you don't want to negotiate on a call so I am not asking for that. But I just want get some better understanding as to your appetite of things like and looking at the lot of cash flow could easily come back with a higher bid it seems like this is a deal that is accretive long-term but maybe neutral near term are you willing to do anything beyond neutral near term I guess if does come back or this is basically this is going to what it is and if comes back so be? Arne M. Sorenson: Right you're absolutely right we are not going to negotiate in public nor really speculate about I think we don't know how they will evolve you should, I think it should be obvious to folks that we substantially improve the offer that we haven't on the table for and we think we have something which is compelling to start with shareholders in terms of upfront compensation and we think it's compelling to the shareholders as the combined companies in terms of what we could accomplished and that is something that we think is unique among those that are bidding for this is creating a platform which because it brings strength from two companies has the ability to create enormous value and that's why we are excited about this that's why our focus is now turning towards integration efforts and getting the proxy benefit of course getting to shareholders both as quickly as we can and we'll have to see what happens with others with that if anything. Ryan Meliker: Yes, I think that make sense I guess I try and understand not going to comment on some of the things you don't know and you don't want to negotiate publicly, I guess when you think about the valuation you came to it looks like just back of the little bit analysis is about 11.5 times 2016 EBITDA for Starwood when you factoring the $250 million in cost synergies that you would get on a run rate basis and that's roughly neutral to where you guys are on the EBITDA to a multiple basis for 2016 was that a driving factor behind this particular valuation. So, that was neutral near term. Arne M. Sorenson: Well, obviously we looked at the range creation, we looked at the EBITDA multiples and we would prefer a deal obviously which had near-term and material accretion and we felt well let's put a bid together that is compelling enough hopefully to carry the day and at same time at least preserve our company from any near term dilution. So, that we can then get to work and drive incremental value that hopefully will drive accretion sooner rather than later. Ryan Meliker: Alright, thanks Arne. Operator: Our next question comes from Joe Greff from J.P. Morgan. Please go ahead. Joseph Greff: J.P. Morgan: Good morning everybody, can you guys hear me okay? MAR: Yes. Kathleen K. Oberg: We can. Arne M. Sorenson: Hey, Joe. Joseph Greff: Arne can you talk about your confidence in divesting Starwood's owned assets has it increased over the past several months and then more specifically to your knowledge is looking at buying any of Starwood's owned assets. Arne M. Sorenson: I have no idea on the second question. The asset sales process is very much being run by Starwood's team and again because we're separate companies, we are not clearly to every detail of their negotiation and by -- is not coming to us and saying here us where we are what you would like to do in this space and so there is we have less than perfect information but I think generally, we are aware of a number of assets where negotiations are ongoing and we remain pretty optimistic about Starwood and then the combined company's ability to go to the asset might like model and sell these owned hotels for a kind of capital that's built into our model. So we feel good about that obviously be a lot of this depends on sentiment in the marketplace sentiment with probably added to lowest in January it's kind of better since then, I think even in January good progress was been made towards some of these hotels and some in fact were sold which you've seen Starwood announced. Joseph Greff: Great. Thank you. Operator: Our next question comes from Robin Farley, from UBS. Please go ahead. Robin Farley: UBS: Great. Thanks. So I saw in the release that the Board no longer sees the bid as the superior proposal and therefore -- more but. Just to understand if the Consortium comes back with a higher bid in that case Starwood would be able to reengage and do further negotiations with them. Arne M. Sorenson: Generally would be the same kind of process I think it's a laid out over the last couple of weeks so if another bid came in and after -- whether not that bid was worth pursuing and afterwards worth pursuing then there would be certain time limitations on the way they pursue that but generally they are not bard contractually from considering other alternatives that come in over the transient. Robin Farley: Okay. Great. I just want to clarify that. Thank you. Operator: Our next question comes from Shaun Kelley from Bank of America Merrill Lynch. Please go ahead. Shaun Kelly: Bank of America Merrill Lynch: Hey good morning everyone, you spoken the slide, you spoken the slide deck a lot about reaccelerating kind of net unit growth here across some Starwood brands but, I'm curious know that you've gone into these, some of the response from the ownership community at Starwood about, the deal and there is anything baked into your assumptions, in terms of or churn or radius restriction does it might relate to some of the full service brand overlap in some of your key markets? Arne M. Sorenson: I think we've had lots of conversations with owner franchises of ours particularly now know that many of them also have investments in Starwood branded hotels. I think generally what we hear is strong alignment with the strategy, strong alignment that we can create something that delivers value to the portfolio of hotels and the system and a lot of excitement around pretty from our franchises in the United States and renewed focused on some of Starwood brands and excitement about pushing for the development of those brands. At the same time whether it's around radius restrictions or whether it's around, individual markets and individual hotels, you off-course got every owner who is thinking about what is the impact precisely of this field on this specific hotel and there was still early in the process we have obviously not engaged with anybody to talk about an individual marketer or an individual hotel because we don't have that level of detailed information. But we would expect because these are hotels in the market, these are brands which are already competing in the market that we'll be able to move forward growth will be comprised we think growth will be enhanced. Shaun Kelly: Great. Thanks and then one of the specific one you are still waiting China regulatory approval given the nature of a counter bid just any insight or color you could give us on at least timing around that approval or so where you stand in that process? Arne M. Sorenson: Yes we are -- we're well into that process we think it's gone well, we don't think that -- but that's the deal where the Chinese bidder that enter the - here that this is a political issue. We don't think if it as a political issue and we don't think there is any reason to believe that -- and China will think of this is a political issue and so we would expect still that clearance should be obtained in a way that allows the transaction to close mid-year. Shaun Kelly: Thanks very much. Operator: Our next question comes from Steve Sakwa, from Evercore ISI. Please go ahead. Steve Sakwa: Evercore ISI: Thanks, good morning. I just wanted to follow up I guess on slide 5 on the significant revenue synergies I know you have talked a lot about the cost side when you sort of think about the revenue synergies are you really thinking about accelerated unit growth between all the brands or is this more on RevPAR and may be taking kind of shares and that you sort of talked about in the presentation and improving its position within the market. Arne M. Sorenson: Well I think it's all of the above although usually in these that's why we're not talk about revenue synergies, we're talking about existing hotels and how to drive their RevPAR index higher and of course we do that will offer drive unit growth which will drive our revenue higher as well but start with the focus on hotel level revenue for existing hotels and we will use one example may be to illustrate this. SPG is a powerful program -- about it, it's got a strong group of elite loyalists, a strong group of loyalists who like the brands, who likes how Starwood treats them when they travel. But too often they do not have a Starwood Hotel that's available when they travel and as consequence they end up hopefully stand with Marriott but sadly they don't always stay at Marriott and sometimes they stay at some of our competitors and I think by folding these two programs together overtime and providing some connectivity even sooner than that we will see for example that those SPG guests try and places within the network that they can stay and earn for us, which should allow us to take a greater share of their wallet than Starwood and or Marriott and or the two combined has to say. That's one example I think beyond that talk about the sales force, we will I think not reduce the number of people who are pursuing sales for the two companies but we are hopeful that we can take now multiple people calling on the same corporate customer and have them cover that many more customers because they can essentially spread their portfolio which also should drive increase capture from those customers. Those are the two of the examples on the revenue side, there are number obviously. Steve Sakwa: Okay and just as a follow-up I guess when you sort of think about the impact I mean obviously the cost synergies is much easier to sort of quantify and get to the bottom line when you think about I guess the comment you made about this deal being sort of neutral in '17 and '18 does that imply that you are not assuming any revenue synergies in that calculation? Arne M. Sorenson: There are no revenue not in the model, sorry Leeny go ahead. Kathleen K. Oberg: Sorry. I just agreeing yes there are no revenue synergies in the model. Steve Sakwa: Okay thank you. Operator: Our next question comes from David Katz from Telsey Group. Please go ahead. David Katz: Telsey Advisory Group: Hi good morning. So, understanding all of the strategic and operating benefits, that go into these, if you could talk about how you think about the hotel business cycle, or how you thought about it as you put this bid together given that it is approximately neutral through 2018, presumably it requires you to think about kind of the business outlook through that period of time? Thanks. Arne M. Sorenson: So, this is in many respect hasn't changed. Although, as per in the margins you could say maybe it should have. When we announced the deal in November because we were using all stock. We want to be advantages of using all stock was that in fact we weren't risky in the company if you will, and we weren't we were using a currency which would rise or fall based on performance of the company of course but also based on essentially where we were on the cycle. And there are also were disadvantages to using the stock because, stock currency is more expensive than cash currency. Here we are now in March we've shifted the deal to be $3.5 billion roughly of cash and the remainder in stock that is not far off our current leverage levels and so, what we feel good about where we are in the cycle, what we feel there are a number of in front of us and we remind everybody that the cycle is really driven by GDP growth on the demand side it's not uniquely a lodging cycle which you should be thinking about and make your judgment about what you think happens with GDP. But we would expect that GDP would continue to grow in the US relatively modestly but positively in the 2% or bit above 2% range and in that model we can drive top line fee growth and we can drive growth that is driven by unit growth and deliver really compelling EPS growth in shareholder returns, that doesn't change with this acquisition. If the markets grow faster, obviously the combined company benefits from those trends, if the markets grow slower, we actually thing, we've changed the risk profile of the Company, because of still the healthy use of the equity in the deal and so in many respects we don't have to take a decision about, whether this is the time to buy from a cycle perspective obliviously we do give a lot of thoughts, to where we are in the cycle, and what we think the future is going to look like and we're positive about that but I don't know that necessarily would control that in a way than you. David Katz: Thank you very much. Operator: Thank you. That question concludes our call for today. I'd like to hand you back now to Arne for some closing remarks. Arne M. Sorenson: Okay well thank you all for joining us on short notice this morning. We appreciate your interest in our story off-course and hope you shared enthusiasm we have for this transaction which will create something that we think is truly remarkable and will be a story that we relish telling in the years ahead. Thanks for your time today and feel free to reach us for some of that questions that we haven't answered. Thank you. Operator: This concludes today's press conference. Thank you all for dialing in.