CHARLOTTE, N.C. — Blackstone Real Estate Partners and Starwood Capital Group have agreed to form a 50/50 joint venture to acquire Extended Stay America (NYSE: STAY) in a deal valued at $6 billion.
Barry Sternlicht, CEO of Starwood Capital (NYSE: STWD), cited Extended Stay America’s performance amid the COVID-19 pandemic as a key factor behind the acquisition.
“Extended Stay has demonstrated resilience over the past year despite persistent challenges due to government lockdowns and travel restrictions,” says Sternlicht. “We are excited about the company’s growth opportunity as restrictions ease and we’re confident that, in partnership with Blackstone, our team has the right experience to drive continued success.”
“Travel and leisure is one of Blackstone’s highest conviction investment themes, and we have confidence in the extended stay model,” adds Tyler Henritze, Blackstone’s head of U.S. acquisitions.
The Charlotte-based hotel owner operates 649 Extended Stay America hotels in the United States spanning over 69,000 rooms. The company’s subsidiary, hospitality REIT ESH Hospitality Inc., owns 563 of those hotels. The remaining 86 properties are franchised, according to Extended Stay America’s fourth-quarter 2020 earnings report.
Blackstone and Starwood Capital’s cash offer is for $19.50 per share, a premium of 15.1 percent to Extended Stay America’s share closing price on Friday.
The board of directors at both Extended Stay America and ESH Hospitality have unanimously approved the transaction. Completion of the deal, which is expected to occur in the second quarter, is contingent upon customary closing conditions, including approval of Extended Stay America’s stockholders. An affiliate of Starwood Capital, which owns approximately 9.4 percent of Extended Stay America’s outstanding shares, has entered into a support agreement whereby it has agreed to vote its shares in favor of the transaction.
This isn’t the first ownership foray into Extended Stay America for Blackstone (NYSE: BX). The New York-based private equity giant purchased Extended Stay America in 2004 for $3 billion before selling the company to Lightstone Group in 2007 for $8 billion.
“We helped create this company nearly 20 years ago and believe our expertise puts us in a unique position to add long-term value,” says Henritze.
Both Blackstone and Starwood Capital purchased minority stakes of Extended Stay America in April 2020, according to media reports. CNBC reports that Extended Stay America’s stock has more than doubled in the past 12 months.
Extended Stay America’s stock price closed on Friday, March 12 at $19.40 per share, up from $6.70 a year ago.
— John Nelson