A 50/50 joint venture between funds managed by Blackstone Real Estate Partners and Starwood Capital Group have signed a definitive agreement to acquire Extended Stay American for $19.50 per share in an all-cash transaction valued at $6 billion.
The purchase price represents a premium of 23.3% over the 30-day volume-weighted average share price ending March 12, 2021 and a premium of 15.1% over the closing stock price on March 12, 2021.
The acquisition follows what has been a deep trough for the hospitality industry over the last year. That, though, has been changing especially with the rollout of the Covid-19 vaccines. Today, travel and leisure is one of Blackstone’s highest conviction investment themes, according to Tyler Henritze, head of US acquisitions for Blackstone Real Estate.
This will be the private equity giant’s third time owning the hotel chain, following its initial purchase in 2004. That is one of the reasons why Blackstone, which already owns a 10% stake in the company, according to the Wall Street Journal, is acquiring it again, says Henritze. “We have confidence in the extended stay model. We helped create this company nearly twenty years ago, and believe our expertise puts us in a unique position to add long-term value.”
Another plus, Barry Sternlicht, CEO of Starwood Capital, noted, has been Extended Stay’s resilience over the past year despite persistent challenges due to government lockdowns and travel restrictions. Indeed, this hospitality category has fared better than others, in large part because it is appealing to vacationers that are driving, not flying, to their destinations.
The transaction is expected to close in the second quarter of 2021, contingent upon customary closing conditions, including approval of the company’s stockholders. The transaction is not contingent on receipt of financing.
Goldman Sachs & Co. LLC is serving as financial advisor to the Company and Fried, Frank, Harris, Shriver & Jacobson LLP is acting as legal counsel.
J.P. Morgan and Citigroup Global Markets Inc. are acting as financial advisors and providing debt financing to Blackstone and Starwood. Simpson Thacher & Bartlett LLP is acting as legal advisor to Blackstone, and Kirkland & Ellis LLP is acting as legal advisor to Starwood Capital.