Blackstone, Starwood Capital Group to acquire Extended Stay America
Extended Stay America Inc. (ESA) and its paired-share REIT, ESH Hospitality Inc. (ESH), have signed a definitive agreement to be acquired by a 50/50 joint venture between funds managed by Blackstone Real Estate Partners and Starwood Capital Group for $19.50 per paired share in an all-cash transaction valued at approximately $6 billion.
The $19.50 per paired share consideration represents a premium of 23.3% over the 30-day volume-weighted average share price ending March 12 and a premium of 15.1% over the closing stock price on March 12.
Doug Geoga, chairman of the boards of ESA/ESH, said, “After a thorough review of the company’s business plan, the boards concluded that the immediate cash premium offered by this transaction is compelling for stockholders. We are delighted with this outcome.”
Bruce Haase, Extended Stay America CEO/president, said, “We are pleased to announce this transaction with Blackstone and Starwood Capital, two of the most experienced investors in the hospitality space with impressive track records of building value in a wide variety of real estate assets, and we look forward to this partnership and continued growth. The boards and senior management are especially grateful to the excellent team of leaders and associates who have made this company such a leader in the lodging industry, and we are confident in the company’s continued success under private ownership.”
Tyler Henritze, head of U.S. acquisitions for Blackstone Real Estate, said, “Travel and leisure is one of Blackstone’s highest conviction investment themes, and we have confidence in the extended-stay model. We helped create this company nearly 20 years ago, and believe our expertise puts us in a unique position to add long-term value.”
Barry Sternlicht, CEO of Starwood Capital, added, “Extended Stay has demonstrated resilience over the past year despite persistent challenges due to government lockdowns and travel restrictions. We are excited about the company’s growth opportunity as restrictions ease and we’re confident that, in partnership with Blackstone and the company, our team has the right experience to drive continued success.”
The transaction has been unanimously approved by ESA’s board of directors and has also been approved by ESH’s board of directors. Completion of the transaction, which is expected to occur in the second quarter of 2021, is contingent upon customary closing conditions, including approval of the company’s stockholders. The transaction is not contingent on receipt of financing. In connection with the transaction, an affiliate of Starwood Capital, which owns approximately 9.4% of the company’s outstanding paired shares, has entered into a support agreement whereby it has agreed to vote its shares in favor of the transaction.
The company does not expect to pay its regular quarterly distribution during the pendency of the transaction except for the previously declared $0.09 distribution on March 26. However, under the terms of the merger agreement, the acquirer may request that ESA pay a special distribution immediately prior to the closing of up to $1.75 per paired share, in which case the cash consideration paid in the merger will be reduced by the amount of the distribution.
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.