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Extended Stay America IPO: Another Deal From Blackstone

BX ending its second go-around with the hotelier


Hotel chain Extended Stay America filed today for an IPO that could end up being one of the largest deals of the year.

Extended Stay is the largest owner/operator of company-branded hotels in North America, with 682 properties across 44 states and Canada. Because the average stay is 28 days — vs. just 2.5 for a traditional hotel — typical rooms offer features like kitchens, free Wi-Fi and housekeeping service. More importantly to investors, those long durations help give Extended Stay higher operating margins and lower occupancy breakeven thresholds.

Still, Extended Stay has had a tumultuous history.

About 10 years ago, Blackstone (BX) snapped up the then-ailing company for $3 billion. From there, BX wasted little time in bulking-up on acquisitions, then sold the hotel operator to Lightstone for a cool $8 billion in 2007 at the beak of the market.

But Blackstone wasn’t done. After Extended Stay filed for bankruptcy in 2009, the firm joined Centerbridge and Paulson & Co. to buy the company again for about $3.9 billion. Extended Stay then was put through a tough restructuring, but also broad-based renovations of properties and increased marketing. Former Starbucks (SBUX) CEO Jim Donald was then brought on in February 2012 to lead the company.

Lately, Extended Stay has been posting strong results. 2012 revenues of $1 billion were 5.5% better than the year-ago period, and adjusted EBITDA climbed 6% to $434.3 million.

The Extended Stay filing is the latest step in Blackstone’s aggressive stance amid an improving economy and healthier appetite for new offerings. Just last week, the company filed for an IPO of Brixmor, the No. 2 owner of shopping centers in the U.S.

In light of that and the Extended Stay IPO, expect more buzz over the future possibilities of another Blackstone holding, Hilton Worldwide.

Extended Stay America plans to list on the New York Stock Exchange, with the ticker to be determined. Lead underwriters include Deutsche Bank (DB), Goldman Sachs (GS) and JPMorgan (JPM).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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