Blackstone Group Inc. and Starwood Capital Group have agreed to acquire hotel owner and operator Extended Stay America Inc. for $6 billion, a bet that a rare bright spot for the lodging industry during Covid-19 can shine brighter as the U.S. emerges from the pandemic.
The companies provided details of the deal, which real-estate executives say is the largest sale in the hotel sector during the Covid-19 period earlier this week.
As bookings plunged across the U.S. hotel industry over the last year due to the Covid-19 pandemic, Extended Stay, which specializes in economy temporary housing for healthcare professionals, proved stronger than its peers.
Private equity company Blackstone’s and investment firm Starwood’s cash offer of $19.50 per share represents a premium of 15.1% to Extended Stay’s share closing price on Friday.
Shares of Extended Stay, which owns and operates 650 hotels in the United States, rose more than 17% before the opening bell.
“Extended Stay has demonstrated resilience over the past year despite persistent challenges due to government lockdowns and travel restrictions,” said Barry Sternlicht, chief executive officer of Starwood Capital.
“We are excited about the company’s growth opportunity as restrictions ease.”
Extended Stay’s stock has more than doubled in the past 12 months, outperforming its larger peers Marriott and Hilton which gained between 60% and 65%.
Extended Stay is a midprice hotel chain that focuses on lodging for guests interested in staying for weeks or longer, offering kitchen facilities and more space than a typical hotel room. During the pandemic, its rooms and suites attracted essential workers, healthcare professionals and others who needed to travel.
That business helped Extended Stay achieve a 74% occupancy rate last year, Blackstone said. The average occupancy rate across all U.S. hotels was 44%, according to hotel data-tracking firm STR.