Extended Stay America convinced enough of its shareholders to accept the latest offer from Blackstone Real Estate Partners and Starwood Capital Group.
ESA and its paired-share real estate investment trust, ESH Hospitality, announced in a news release Friday that a majority of shareholders voted in favor of the amended offer by Blackstone and Starwood Capital to acquire ESA and ESH Hospitality in a 50/50 joint venture for $20.50 per paired share. ESA did not disclose the percentage of shareholders who approved the deal and indicated the vote results were "preliminary."
The transaction includes the Extended Stay America brand, management operations and its owned hotel portfolio, which at the close of 2020 comprised 563 properties.
The deal is scheduled to close on June 16.
The Board of Directors from Extended Stay America and ESH Hospitality unanimously approved Blackstone and Starwood Capital's first offer in mid-March — a $6 billion cash deal equal to $19.50 per paired share.
Barry Sternlicht, CEO of Starwood Capital, said in a statement announcing the deal that Extended Stay America was a leader in the hotel industry's extended-stay segment, which has recovered more quickly since the onset of the pandemic.
“Extended Stay [America] has demonstrated resilience over the past year despite persistent challenges due to government lockdowns and travel restrictions," he said.
But after some of Extended Stay America's shareholders — including Tarsadia Capital, SouthernSun Asset Management, Cooke & Bieler, River Road Asset Management and Hawk Ridge — expressed disappointment with the sale price, Blackstone and Starwood Capital raised their offer to $20.50 per paired share on June 1.
Doug Geoga, chairman of the boards for Extended Stay America and ESH Hospitality, said in a statement the revised offer was "the best outcome possible for shareholders.”
The three companies have deliberated about a sale since 2017, according to proxy statements filed with the U.S. Securities and Exchange Commission. For about three years, Blackstone and Starwood Capital both made independent offers for ESA before joining forces on the deal early in 2021.
In July 2017, Starwood Capital approached ESA with interest in acquiring the company at a price range of $22 to $24 per share. Starwood executives backed away in September, expressing that a deal valued greater than ESA's share price — $20.20 at the time — was unlikely. Starwood’s initial offer spurred ESA’s executive team to engage with two other companies on a potential acquisition: Blackstone, which offered $19.50 a share in November 2017 and $20.75 a share in December 2017; and a third, unnamed entity that was not interested in a deal.
In July 2018, the company launched a review of strategic alternatives that included the possibility of keeping its real estate holdings and selling off its hotel brand and management business, but garnered no interest from potential buyers.
ESA continued negotiations with other "publicly traded hotel franchising companies" in September 2018 — according to proxy statements — but walked away from negotiations in May 2019.
As recently as March 6, 2021, Blackstone offered $18.75 per share for ESA and ESH Hospitality, according to proxy statements. ESA, Blackstone and Starwood Capital then reached an agreement for the $19.50-per-share price on March 13.
Were it to close, the deal would be the third time Blackstone has acquired Extended Stay America. In 2004, affiliates of The Blackstone Group acquired Extended Stay America for $3.1 billion. Blackstone then sold Extended Stay America in 2007 to The Lightstone Group for $8 billion.
In June 2009, Extended Stay America filed for Chapter 11 bankruptcy. During this period, affiliates of Blackstone and Starwood Capital competed to take the company out of bankruptcy, and in July 2010, a consortium led by Centerbridge Partners, Blackstone Group and Paulson & Co. bought the hotel company for nearly $4 billion. Several months later, the company emerged from bankruptcy.
Blackstone and Starwood Capital each acquired stakes in Extended Stay America in 2020. Blackstone acquired a 4.9% stake and Starwood Capital acquired an 8.5% stake.
At press time, Extended Stay America's stock price was trading at $20.45 per share, up 38.1% year to date and 0.57% since opening.