Blackstone-Starwood JV to pay $6B for Extended Stay and ESH

A 50/50 joint venture between funds managed by Blackstone Group Inc.'s Blackstone Real Estate Partners and Starwood Capital Group agreed to acquire Extended Stay America Inc. and its paired-share real estate investment trust, ESH Hospitality Inc., for nearly $6 billion, or $19.50 per paired share.

The all-cash transaction represents a premium of 15.1% over the March 12 closing stock price.

An affiliate of Starwood Capital, which already owns about 9.4% of Extended Stay America and ESH's outstanding paired shares, agreed to vote its shares in favor of the deal. The acquisition is not contingent on receipt of financing, according to a release.

The respective board of directors of Extended Stay America and ESH Hospitality have unanimously approved the transaction, which is expected to close in the second quarter, subject to customary closing conditions that include approval of the companies' stockholders.

Under the terms of the deal, the buyers may request that Extended Stay America pay a special distribution immediately prior to the closing of up to $1.75 per paired share, in which case the cash consideration paid in the merger will be reduced by the amount of the distribution. Extended Stay America and ESH Hospitality said they do not expect to pay regular quarterly distribution while the transaction is pending except for the declared 9 cents per share payout March 26.

Goldman Sachs & Co. LLC is financial adviser, and Fried Frank Harris Shriver & Jacobson LLP is legal counsel to Extended Stay America and ESH.

J.P. Morgan and Citigroup Global Markets Inc. are financial advisers and are providing debt financing to Blackstone and Starwood. Simpson Thacher & Bartlett LLP is legal adviser to Blackstone, and Kirkland & Ellis LLP is legal adviser to Starwood Capital.