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Marriott & Starwood merger: two hotel owners challenging the deal before the NY Supreme Court

Cityfront Hotel Associates Ltd -owner of the Sheraton grand Chicago- and Dream Team Hotel Associates -owner of the Westin Times Square in New York- are both challenging Starwood's takeover by Marriott and brought their case to the NY Supreme Court. They argue that the deal would violate local exclusivity clauses defined in their management contracts.

The two groups, both of which own hotels operated under Starwood brands, base their argument on the radius restriction clauses defined by their management contracts. These clauses ban the hotel group from operating other hotels in both properties' neighboring areas, within a specific radius. The takeover of Starwood Hotels by Marriott International is regarded by both plaintiffs as a breach of this clause, since hotels operated by Marriott would actually fall into the new single operator's portfolio and hence into the prohibited radius.

The New York State Supreme Court, New York County (Manhattan), will arbitrate this case. The result will be interesting to evaluate the impact of such clauses and risks stemming from scrutiny by competition authorities. The plaintiffs demand the deal to be canceled as their first option, or at least an early repudiation of their contracts.

For those of you wishing to follow up on this case's further developments in upcoming weeks, search "652521/2016" or "CityFront Hotel Associates Limited Partnership v. Starwood Hotels & Resorts Worldwide Inc."on the New York State Supreme Court Website's search tool. The full original complaint is available here:

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