EXTENDED STAY AMERICA acquired by BLACKSTONE & STARWOOD CAPITAL GROUP

Blackstone Real Estate Partners and Starwood Capital Group acquired Extended Stay America and its paired-share REIT ESH Hospitality through a 50/50 joint venture, in an all-cash transaction valued at an enterprise value of $1–10bn. The agreement, signed on March 15, 2021, priced each paired share at $19.50, a premium of 23.3% over the 30-day volume-weighted average share price ending March 12, 2021 and of 15.1% over the closing price on that date. The boards of both ESA and ESH unanimously approved the transaction. An affiliate of Starwood Capital holding approximately 9.4% of the company's outstanding paired shares entered into a support agreement to vote in favour of the merger. Under the merger agreement, the acquirer could request a special distribution paid immediately before closing, of up to $1.75 per paired share, with the cash consideration reduced by the same amount; outside that option, the company did not expect to pay its regular quarterly distribution during the pendency of the transaction beyond the previously declared $0.09 distribution scheduled for March 26, 2021. Completion was expected in the second quarter of 2021 and remained subject to closing conditions, including approval by the company's stockholders, and was not contingent on receipt of financing. Goldman Sachs advised the company, with Fried, Frank, Harris, Shriver & Jacobson as legal counsel. J.P. Morgan and Citigroup Global Markets acted as financial advisors to Blackstone and Starwood and provided debt financing, while Simpson Thacher & Bartlett advised Blackstone and Kirkland & Ellis advised Starwood Capital.

Extended Stay America had already undergone several LBOs in the past, notably in 2004 with Blackstone and in 2007 with Lightstone Group. This succession of buyouts highlights the strong attractiveness of the company's business model.