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Marriott International Inc.'s acquisition of Starwood Hotels & Resorts Inc. was challenged by the owners of hotels in Chicago and New York who say the merger would violate exclusivity agreements.
Cityfront Hotel Associates Limited Partners, the owner of the Sheraton Grand Chicago, and Dream Team Hotel Associates, which owns the Westin Times Square in New York, sued Marriott and Starwood in New York state court Tuesday, arguing the merger would unfairly eat into their business.
Sheraton and Westin are units of Starwood. The lawsuit seeks to block Marriott and Starwood from taking steps to finalize the purchase.
Marriott is preparing to complete its deal to buy Starwood following a tumultuous bidding war. The purchase, valued at $12.9 billion based on Monday's closing prices, would create the world's largest hotel operator by room count.
Marriott would add 10 brands including Sheraton, W, St. Regis and Westin, along with a global following of loyal guests. Marriott currently has 19 brands, including its namesake hotels, in addition to Ritz-Carlton and Bulgari.
The new company would gain power in negotiating commissions with online travel agents and be able to better compete with upstarts such as Airbnb Inc. The deal is scheduled to close midyear.
Thomas Marder, a spokesman for Marriott, and Carrie Bloom, a spokeswoman for Starwood, declined to comment on the suit.
The plaintiffs say the deal would violate contract clauses that prohibit Starwood from owning, franchising, operating or managing other hotels within a specific geographical area around the two hotels.