The Starwood Hotels & Resorts Chief Executive Steven Heyer has resigned after he and the company's board clashed over his management style, though analysts say the company's overall strategy is sound.
The change at the top suggests the company could be sold, analysts said. Starwood shares rose nearly 5 percent in morning trading.
Chairman Bruce W. Duncan was named to serve as interim CEO while the board searches for a permanent replacement. Duncan said Monday that he would serve until a successor is found and that the board has not set a time limit for finding the new CEO.
Heyer was CEO for two-and-a-half years. Board member Stephen Quazzo, who is leading the search for a replacement, said the company has no plans to change its strategy of further developing its fee-based franchise business and selling off some real estate assets.
Heyer, 54, had been CEO and a director at Starwood since October 2004, and is leaving both posts. Duncan, 55, has been Starwood's chairman since 2005 and a board member for more than a decade.
The company announced that Chief Marketing Officer Javier Benito is also leaving the company, which Quazzo said is unrelated to Heyer's departure. Benito made his decision six weeks ago, Duncan said.
Starwood operates hotels under the brand names St. Regis, Sheraton, Westin, W Hotels, Aloft and Element. The company has more than 400 hotels, or about 100,000 rooms, in its active pipeline.
The company said in a news release that differences in opinion regarding Heyer's management style led the board "to lose confidence in his leadership."
One issue analysts raised was that Heyer lived in Atlanta for his entire term as CEO, commuting to the company's headquarters in White Plains, New York.
"I will be based in White Plains so I can be easily accessibly to Starwood leadership team and be closely involved in daily operations," Duncan said Monday.
The management shake-up could lead to a sale of the company, Citigroup analyst Joshua Attie said.
"Change in leadership may serve as a catalyst for Starwood to explore the possibility of an outright sale," Attie wrote in a Monday morning note to investors. "We have no specific knowledge of a transaction, but the environment seems right in which to sell the company."
Goldman Sachs analyst Steven Kent said there has been speculation for the past year that Starwood could be a target for a private equity takeover. Heyer's sudden departure and the resulting lack of a permanent CEO could signal to investors that a buyout is more likely now than before and send the share price higher.
When asked on Monday about the rumors, Duncan said, "We think we have a great future as a public company. We have a great strategy in place ... we're going to execute on that strategy."
Morgan Stanley analyst Celeste Mellet Brown maintained an overweight rating on the company's stock, based on the company's performance in generating better-than-average revenue per available room and execution in building new hotels in the U.S. and overseas.
As it announced the top-level moves, Starwood reaffirmed its first-quarter and full-year guidance.
At the same time, Starwood said it backed its first-quarter and full-year 2007 outlooks, calling for full-year profit of about $2.50 (EUR1.87) per share, and a quarterly profit of 38 cents per share.
Analysts polled by Thomson Financial are looking for annual earnings of $2.52 (EUR1.89) per share, and first-quarter profit of 39 cents per share.
Starwood is slated to report its first-quarter results on April 26.
Starwood said its earnings surged to $1.04 billion (EUR 0.78 billion), or $4.69 (EUR3.51) per share, for all of 2006 from $422 million (EUR 315.73 million), or $1.88 (EUR1.41) per share, in the prior year. Full-year revenue was essentially flat at $5.98 billion (EUR4.47 billion).
Starwood shares rose $2.96, or 4.6 percent, to $67.81 in midmorning trading on the New York Stock Exchange. They have traded in a 52-week range of $49.68 to $69.65.
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