Blackstone, Starwood buy Extended Stay for $6bn

Blackstone and Starwood Capital have agreed to pay $6bn (£4.3bn) to buy Extended Stay America in a bet the hotel group will prosper as the US economy reopens.

The private equity groups will pay $19.50 in cash for the midprice chain - 15.1% more than the company's closing share price on 12 March and 23.3% higher than its 30-day average price before that date.

The buyout firms are splitting the deal equally and said the purchase was a bet on the company's prospects as Covid-19 restrictions ease. Living up to its name, Extended Stay caters for people planning to stay for several weeks or longer. It has 650 hotels in 44 states and employs more than 7,500 people.

Extended Stay's rooms, which have kitchens and more space than typical hotel accommodation, have been popular with keyworkers, healthcare professionals and others who have had to travel during the pandemic. The company had 74% occupancy last year compared with 44% for the wider hotel sector.

Barry Sternlicht, chief executive of Starwood, said: “Extended Stay has demonstrated resilience over the past year despite persistent challenges due to government lockdowns and travel restrictions. We are excited about the company’s growth opportunity as restrictions ease."

The private equity groups expect contractors, construction workers and consultants to fill Extended Stay's rooms as Covid-19 vaccines are administered, the economy opens up and Americans start travelling again.

Doug Geoga, Extended Stay's chairman, said: “After a thorough review of the company’s business plan, the boards concluded that the immediate cash premium offered by this transaction is compelling for stockholders. We are delighted with this outcome.”