Blackstone Group to buy hotel REIT MeriStar for $2.6 billion
COLLEGE PARK, Md. – Hotel real estate company MeriStar Hospitality Corp. said Tuesday it has agreed to a $2.6 billion buyout by an arm of The Blackstone Group, the latest in a string of large lodging buys by the private investment firm.The New York-based Blackstone said it will offer $10.45 per share of MeriStar, a roughly 5 percent premium over the Bethesda-based MeriStar’s Friday closing price of $9.93 per share. The deal has already been approved by MeriStar’s board and will be voted on by company shareholders. It is expected to close in the second quarter if accepted.Shares of MeriStar, one of the nation’s largest real estate investment trusts, with 57 upscale hotels, rose 35 cents, or more than 3.5 percent, to $10.28 in afternoon trading Tuesday on the New York Stock Exchange.MeriStar CEO Paul Whetsell said the sale “represents attractive value to our shareholders.” Lodging analyst Bill Crow of Raymond James & Associates said the deal “looks like a very full price for this portfolio.”It is also the sixth Blackstone acquisition of a public lodging company in the past several years, including the $3.24 billion merger with Wyndham International completed last August.In January, Blackstone closed its $3.4 billion purchase of Dallas-based La Quinta Corp. and in 2004 it bought Extended Stay America for nearly $2 billion. Blackstone also bought Boca Resorts and Prime Hospitality Corp. in 2004.Blackstone’s buying spree is likely a symptom of the rebounding lodging and travel sector, which suffered a sharp downturn during the post Sept. 11, 2001 travel slump, Crow said.”They view it as an opportunity to come in and pay fair prices to get assets and brands enjoying what is a very strong recovery in the lodging sector that should persist for the next several years,” he said.Other private investors have also sank large sums recently into the hotel real estate in the past year. A group that includes a Saudi prince agreed to buy luxury chain Fairmont Hotels & Resorts Inc. for $3.3 billion in January over a rival bid from billionaire investor Carl Icahn. Earlier this month, a development firm run by Black Entertainment Television Founder Robert Johnson picked up 100 hotels for $1.7 billion.MeriStar has been on the selling block before – in 2001, FelCore Lodging and Trust agreed to buy it for $1.1 billion. But the deal was scrubbed when the stock market plunged shortly after the Sept. 11 attacks.In February, Blackstone bought nine hotels and a golf and tennis club from MeriStar for $367 million in cash. That deal is not affected by the merger agreement. The brand names among MeriStar’s portfolio include Hilton, Sheraton, Marriott, Ritz-Carlton, Westin, Doubletree and Radisson.