Duncan's new contract means the Starwood won't be distracted by a search for a permanent chief and "allows the company to negotiate with potential buyers," William Truelove, an analyst at UBS Securities LLC, said in a note to investors today. Speculation that the company may be bought began after the ouster of CEO Stephen Heyer April 2.

Shares of Starwood, the third-largest U.S. hotel company, rose $1.64, or 2.3 percent, to $73.71 at 4:21 p.m. today in New York Stock Exchange composite trading. It was the highest since 1998, when the company added the Sheraton hotel chain by buying ITT Corp. The shares have risen 10 percent since May 24.

Duncan was named interim CEO after Heyer's departure and signed to a one-year agreement May 24, the company said in a regulatory filing yesterday.

Other factors that make Starwood, which is based in White Plains, New York, attractive to buyers include its luxury properties in Europe and relatively low debt, Truelove wrote. The perceived risk of owning Starwood's bonds jumped to a seven- month high.

Credit-default swaps based on $10 million of the company's bonds rose $8,000 to $147,000, according to CMA Datavision. An increase in the five-year contracts, used to speculate on the company's ability to repay its debt, indicates deterioration in the perception of credit quality; a decline suggests improvement.