Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) announced its first-quarter financial results Wednesday before the markets opened. While Starwood beat earnings expectations, this will be no match whatsoever for the buzzwords “exploring strategic alternatives.” It would seem as though that Starwood’s strategic and financial alternatives may go beyond just increasing shareholder value — it may be an effort to jump ahead of activist investors or to avoid pressure from shareholders.

24/7 Wall St. has covered the earnings report, but the real consideration is what sort of underlying value investors could come away with. Starwood could again become the ultimate prize for private equity. After all, this was sort of the darling that got away in the last private equity boom back before the recession.

In the first quarter, the company had $0.65 in earnings per share (EPS) on $1.42 billion in revenue. That compared to Thomson Reuters consensus estimates of $0.57 in EPS on $1.39 billion in revenue. In the same period of the previous year, Starwood reported $0.63 in EPS on $1.46 billion in revenue.

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In February, the company declared a regular quarterly dividend of $0.375 per share, which was paid at the end of March. The total dividends paid in the first quarter were approximately $64 million. At the same time, Starwood repurchased 1.6 million shares at a total cost of roughly $123 million and a weighted average price of $78.29 per share. At the end of March, about $706 million remained under Starwood’s share repurchase authorization.

The company ended the quarter with gross debt of $2.5 billion, cash and cash equivalents of $623 million, equaling a net debt of $1.9 billion.

The company gave its outlook for both the second quarter and the full year ahead, but this guidance assumes a couple of things. First, the spin-off of the vacation ownership business will occur by then end of December 2015 — generating some value for shareholders — and that shifts in exchange rates will have a negative impact on earnings. For the second quarter, Starwood expects adjusted EBITDA to be roughly $290 million to $300 million and EPS to be $0.70 to $0.74. The consensus estimates are $0.79 in EPS on $1.49 billion in revenue.

In terms of exploring new options to increase shareholder value, Chairman Bruce Duncan said:

Our Board has always been focused on maximizing long-term shareholder value, and this is a time of enormous opportunity and change in our industry. Accordingly, we will thoroughly explore the full range of strategic and financial alternatives available to Starwood to capitalize on our industry-leading global platform and best-in-class premium brands. No option is off the table, and we will take the time we need to thoroughly evaluate our opportunities and achieve the best result for our shareholders, business partners, and associates.

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Currently, the board is in the beginning stages of the strategic and financial review, and there are of course no assurances that can be given as to the outcome or timing of when this plan will come to fruition. Starwood did state that it has no intention of making any further public comment regarding the review until it has been completed.

Note that Starwood has a market cap of nearly $15 billion, and if it were to be bought out, 24/7 Wall St. would expect that shareholders almost certainly will expect a premium to the current share price. Would that be $17 billion, $20 billion or more?

Starwood also has a problem in that revenues were $5.98 billion in 2014, down from $6.11 billion in 2013 and more than $6.3 billion in 2012. Analysts are calling for a 1% decline in revenues to $5.92 billion in 2015 as well, with an expected gain of 5% to $6.23 billion in 2016.

Another issue is that Starwood’s balance sheet is also already leveraged. That would make a leveraged buyout perhaps seem live a double-levered buyout here. The total equity was only $1.52 billion at the end of 2014, with a slight negative balance on net tangible assets now that long-term debt rose again. That means that will require sophisticated investors to see if the real value of the hotels, properties and brand names are worth a lot more in real-world financial dollars instead of what the company is carrying them at on the books.

So, here is the question to consider: Will alternatives end up bringing an outright sale of the company, or will they lead to unit or property sales? The answer is far more complicated, and it actually may be many answers.

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What Starwood investors already know is that the company owns many top hotel properties and brands. On top of hotel properties, Starwood also has vacation ownership resorts (timeshares). The company currently operates roughly 1,200 properties located across 100 countries. Some of the brand names it owns, operates or franchises are as follows:

• Luxury Collection
• Aloft
• W
• Westin
• Meridien
• Sheraton
• Four Points
• Element

Now go back to the best days of the private equity boom. Starwood was always considered a prime target, or perhaps even the ultimate prize. The problem was that the size of the company was always a stretch for any one firm to gobble up the company as a whole. That would leave a private equity club deal as the alternative, and private equity companies are less aggressive on buying up large companies at the market highs of today.

What may be an issue is that investors are now less willing than before to repurchase a big new company repackaged as a leveraged up initial public offering (IPO) with private equity sellers taking every penny out in the offering.

Anyhow, Starwood is up for grabs as a whole — or at least many parts of it could be up for grabs. The market cap after the pop on Wednesday is $14.8 billion, which would have to have a premium on top of it to get much shareholder support in an outright buyout. Maybe there are a few guys that can drum up $20 billion or so to buy a series of hotel chains with the stock market at all-time highs. That being said, it may take a few players to do a deal rather than just one private equity firm.

Starwood just became one of those truly special situations. Value investors likely will have a hard time evaluating this scenario due to the balance sheet. Private equity firms will have to make some serious considerations here, because giant acquisitions in club-deals just feel like they are strategies of the past decade that disappeared with the recession. And speculators, well they are going to just have to speculate.

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Maybe some firm should call Warren Buffett and see if he would be interested in owning a piece of this great amalgamation of hotel and resort properties.

Lastly, what would analysts expect? Starwood was trading at $80.80 prior to this news about strategic alternatives. The stock has a consensus analyst price target of $85.67, with the lowest analyst target being $77.00 and with the highest up at $95.00.

Shares of Starwood were up almost 7.7% at $87.00 in late morning trading on Wednesday. The 52-week trading range is $68.53 to $87.88.

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