NEW YORK - Marriott International Inc Monday announced plans to buy Starwood Hotels and Resorts Worldwide Inc for $12.2-billion to create the world's largest hotel company with several top brands under its wings including Sheraton, Ritz Carlton and the Autograph Collection.

The boards of directors of both companies have unanimously approved a definitive merger agreement that will combine Starwood's leading lifestyle brands and international footprint with Marriott's strong presence in the luxury and select-service tiers, as well as the convention and resort segment, creating a more comprehensive portfolio, the companies said in a joint statement.

Combined, the companies operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide. The takeover will give Marriott greater presence in markets such as Europe, Latin America and Asia including India and China.

Marriott currently has three-quarters of its rooms in the United States. Starwood, which also owns St. Regis and Aloft hotel brands, gets nearly two-thirds of its revenue from outside the country.

The combined company's pro forma fee revenue for the 12 months ended September 30, 2015 totals over $2.7 billion.

"We have been in the business for a long time but Starwood is more global than Marriott is," Marriott Chief Executive Arne Sorenson, who will lead the combined company, told CNBC. "It's a good thing that we will have more sources (of growth) from around the world."

Under the terms of the agreement, at closing, Starwood shareholders will receive 0.92 shares of Marriott International, Inc. Class A common stock and $2.00 in cash for each share of Starwood common stock.

On a pro forma basis, Starwood shareholders would own approximately 37 percent of the combined company's common stock after completion of the merger using fully diluted share counts as of September 30, 2015.

Of the total $12.2 billion to be paid by Marriott as much as $11.9 billion will comprise Marriott International stock, based on the 20-day VWAP (volume weighted average price) of Marriott stock ending on November 13, 2015, and $340 million of cash, based on approximately 170 million fully diluted Starwood shares outstanding at September 30, 2015.

Based on Marriott's 20-day VWAP ending November 13, 2015, the merger transaction has a current value of $72.08 per Starwood share, including the $2 cash per share consideration.

Starwood shareholders will separately receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with Interval Leisure Group, which has an estimated value of approximately $1.3 billion.

Alternately, Starwood shareholders would receive approximately $7.80 per share, based on the 20-day VWAP of Interval Leisure Group stock ending November 13, 2015. The timeshare transaction should close prior to the Marriott-Starwood merger closing, expected in mid 2016.

Marriott said it expected one-time transaction cost of $100-million-$150-million related to the acquisition, which was expected to add to earnings from the second year after it closes.

Starwood shares fell 5.2 percent to $71.07 in premarket trading on Monday, below the offer price of $72.08, indicating investors were unhappy with the offer being at a 4 percent discount to the stock's Friday close. Marriott shares fell 1.3 per cent to $71.65.

Starwood had indicated in April that it was looking at a possible sale, when it made known plans to consider strategic alternatives. The company had reached out to InterContinental Hotels Group Plc, Wyndham Worldwide Corp and sovereign wealth funds for a possible deal since July, Reuters had reported citing sources.