Extended Stay America Acquired by Blackstone and Starwood Capital Group for $6B

Extended Stay America (STAY), along with its paired-share REIT, ESH Hospitality, Inc., has been acquired by funds managed by Blackstone Real Estate Partners (Blackstone) and Starwood Capital Group for $20.50 per paired share in a cash transaction worth $6 billion.

Requisite under the terms of the deal, STAY declared a special cash dividend of $1.75 per share paid immediately before the effective time of the merger to shareholders of record on June 15. (See STAY stock chart on TipRanks)

Shareholders on the record date and through the effective time of the mergers will receive $20.50 in cash, which includes the special cash dividend of $1.75 as well as the deal consideration. The consideration comprises $10.40 per share of ESA common shares and $8.35 per share of Class B common stock of ESH.

In March, STAY signed an agreement to be taken private in a 50/50 joint venture between Blackstone Real Estate Partners and private investment firm Starwood Capital Group. The deal was then priced at $19.50 per share.

However, the offer price faced a negative reaction from investors, especially Tarsadia Capital, which owned a 3.9% stake in Extended Stay. The investor expected a higher price for the shares as he believed that the offer price undervalued the company.

As a result, new amendments were made to the deal price on June 4 backed by leading independent proxy advisory firm, Institutional Shareholder Services Inc. (ISS).

Likewise, Blackstone and Starwood Capital agreed to pay STAY shareholders an incremental $1.00 per paired share for a total cash consideration of $20.50.

Going forward, the paired shares will cease trading on the Nasdaq Global Select Market.

Robert W. Baird analyst Michael Bellisario recently reiterated a Hold rating on the stock with the price target of $20.

Leading up to the acquisition announcement, News Sentiment on STAY has been Neutral, with 50% of articles being bullish versus a sector average of 63% over the last seven days.