Benzinga | Jun 9, 2021 08:10AM EDT

Extended Stay Urges Shareholders To Vote For Deal With Blackstone, Starwood

Extended Stay America, Inc. ("ESA") and its paired-share REIT, ESH Hospitality, Inc. ("ESH" and, together with ESA, "Extended Stay" or the "Company") (NASDAQ:STAY) today published a letter strongly urging its shareholders to vote "FOR" the transaction with funds managed by Blackstone Real Estate Partners ("Blackstone") and Starwood Capital at the ESA Special Meeting which will be held Friday, June 11, 2021, at 8:30 a.m., Eastern Time.

Extended Stay shareholders are reminded that their vote is extremely important, no matter how many shares they own. Failure to vote or an abstention from voting will have the same effect as a vote against the transaction. Shareholders who have not yet voted are strongly encouraged to vote their shares in favor of the transaction on the WHITE Company proxy card.

The full text of Extended Stay's letter to shareholders follows:

Dear Extended Stay America Shareholders,

With only a few days before our special meeting, now is the time to vote on the WHITE proxy card FOR the certain, immediate, and compelling cash value transaction with Blackstone and Starwood Capital.

Our Boards have explored numerous value-enhancing alternatives over several years and unanimously concluded that this transaction represents the best possible outcome for Extended Stay shareholders. ISS, a leading independent proxy advisory firm, has recommended shareholders vote in favor of the transaction. We urge all shareholders to vote FOR the transaction on the WHITE proxy card no matter how many shares they own.

To put it simply, the stakes could not be higher.

* Shareholders should seriously consider the meaningful downside risk to the share price -- recognized by independent third parties -- if the transaction is not approved. Independent sell-side research firm Jefferies concludes, "Absent a deal, shares of STAY have the potential to trade into the $15-$16 range temporarily, roughly 24% lower than the proposed offer, in our view."1

And the risk of value destruction under an independent approach governed by Tarsadia is high.

* Tarsadia's latest suggestion to hang their hat on "a new and robust [sale] process, overseen by a refreshed and independent Board" is the latest in a string of self-serving and inconsistent arguments attempting to ultimately seat their directors and implement a thesis that each of the Company's current directors is convinced would destroy value for shareholders.

In contrast, this transaction delivers significant value, right now, and we are convinced it is a better alternative to all other potential outcomes.

* The $20.50 per paired share offer delivers a meaningful premium to shareholders across multiple time horizons and values our paired shares at a 59% premium to their pre-pandemic value. It also values the Company at 16.0x 2020 EBITDA, 13.4x 2021 estimated consensus EBITDA and 11.9x 2022 estimated consensus EBITDA, all of which represent significant premiums to where Extended Stay has traded in its time as a public company (9.5x 5-year average NTM EBITDA trading multiple prior to the pandemic).

* The $20.50 per paired share consideration offers a 21.0% premium over the closing price of $16.94 on March 12, 2021, the last trading day prior to the announcement. We also note that the transaction represents an implied 30.3% premium, which ranks in the 81st percentile of precedent REIT all-cash transactions since 2013, based on the extrapolated Extended Stay stock price since the March 15, 2021 announcement over which time lodging companies had traded down 7.1%.2

Thank you for your support. And please vote the WHITE card FOR this value-creating transaction.

Sincerely,

Doug Geoga, Chairman of the Boards of the Company

Bruce Haase, President and Chief Executive Officer

To follow the recommendations of ISS and the Company's Boards, shareholders should vote "FOR" the proposal on the WHITE proxy card today to approve the transaction and secure the certain, immediate and compelling value of $20.50 per paired share in cash. Shareholders who have already voted in favor of the transaction do not need to recast their votes. Proxies previously submitted will be voted at the Special Meeting unless properly revoked. Shareholders who have not already voted or wish to change their vote are encouraged to do so. Voting today by internet, telephone, or mail cancels any vote previously cast. Only the latest dated proxy, internet or telephonic vote counts.

If you have any questions, or need assistance in voting your shares, please immediately contact Okapi Partners LLC, our proxy solicitor, at (877) 629-6357 (toll-free) or at info@okapipartners.com.