Acquisitions and Dispositions Acquisitions and Dispositions (Tables)

9 Months Ended

Sep. 30, 2016

The following table presents the results of Starwood operations included in our Income Statements for the eight days from the Merger Date through the end of the 2016 third quarter.



($ in millions)	September 23, 2016 - September 30, 2016
Revenue	$	168
Net loss	$	(131	)

The following table presents the fair value of each class of consideration transferred.



(in millions, except per share amounts)
Equivalent shares of Marriott common stock issued in exchange for Starwood outstanding shares	134.4
Marriott common stock price as of Merger Date	$	68.44
Fair value of Marriott common stock issued in exchange for Starwood outstanding shares	9,198
Cash consideration to Starwood shareholders, net of cash acquired of $1,116	2,412
Fair value of Marriott equity-based awards issued in exchange for vested Starwood equity-based awards	88
Total consideration transferred, net of cash acquired	$	11,698

The following table presents pre-tax merger-related costs and other charges that we incurred in connection with the Starwood Combination.



	Three Months Ended				Nine Months Ended
($ in millions)	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Merger-related costs and charges
Transaction costs	$	18	$	—	$	31	$	—
Employee termination costs	186		—		186		—
Integration costs	24		—		33		—
	228		—		250		—
Interest expense	9		—		22		—
	$	237	$	—	$	272	$	—

Schedule of Fair Value of Assets Acquired and Liabilities Assumed

The following table presents our preliminary estimates of fair values of the assets that we acquired and the liabilities that we assumed. Our preliminary estimates are based on the information that was available as of the Merger Date, and we are continuing to evaluate the underlying inputs and assumptions used in our valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the Merger Date.



($ in millions)
Working capital	$	(115	)
Property and equipment	2,045
Identified intangible assets	8,573
Equity and cost method investments	648
Other noncurrent assets	207
Deferred income taxes, net	(1,845		)
Guest loyalty program	(1,647		)
Debt	(1,876		)
Other noncurrent liabilities	(518		)
Net assets acquired	5,472
Goodwill ⁽¹⁾	6,226
	$	11,698


(1)	Goodwill is calculated as total consideration transferred, net of cash acquired, less identified net assets acquired, and it primarily represents the value that we expect to obtain from synergies and growth opportunities from our combined operations. We have not completed the assignment of goodwill to our reporting units as of the date of this report, and it is not deductible for tax purposes.

Schedule of Fair Values of Identified Intangible Assets

The following table presents our preliminary estimates of the fair values of Starwood’s identified intangible assets and their related estimated useful lives.



	Estimated Fair Value (in millions)		Estimated Useful Life (in years)
Brands	$	6,400	indefinite
Management and Operating Lease Agreements	1,394		20-30
Franchise Agreements	729		20-80
Loyalty Program Marketing Rights	50		25-30
	$	8,573

Schedule of Future Minimum Lease Obligations

The following table presents the future minimum lease obligations that we assumed and for which we are the primary obligor as of September 30, 2016:



($ in millions)	Operating Leases		Capital Leases
2016, remaining	$	16	$	3
2017	64		11
2018	61		12
2019	57		12
2020	55		12
Thereafter	630		203
Total minimum lease payments	$	883	$	253
Less: amount representing interest			(86		)
Present value of minimum lease payments			$	167

Schedule of Pro Forma Information

The following unaudited pro forma information presents the combined results of operations of Marriott and Starwood as if we had completed the Starwood Combination on January 1, 2015, but using our preliminary fair values of assets and liabilities as of the Merger Date. As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Starwood Combination had occurred at the beginning of the period presented, nor are they indicative of future results of operations.



	Nine Months Ended
($ in millions)	September 30, 2016		September 30, 2015
Revenues	$	15,038	$	14,373
Net income	$	853	$	675

The unaudited pro forma results include $54 million of integration costs for the nine months ended September 30, 2016 and $320 million of transaction and employee termination costs for the nine months ended September 30, 2015.