Blackstone Group LP is all set to acquire Strategic Hotels & Resorts, a group of luxury properties across USA in a deal costing $6 billion including debt.
Blackstone, one of the world’s largest private-equity firm is venturing on growing demand for luxury hotels. Last May, the company acquired three high-end resorts – the JW Marriott and the Ritz-Carlton in Orlando, Florida and the JW Marriott Phoenix Desert Ridge in Arizona – for around $1.25 billion from a group led by Paulson & Co.
Chicago-based Strategic Hotels & Resorts had announced in August that it was looking out for sale considering all the other strategic alternatives. It had brought in J.P Morgan as a financial advisor for this business deal. According to the current deal from Blackstone, the fund would pay $14.25 for each outstanding share of Strategic Hotels & Resorts, whose 17 properties are run by top hospitality chains. The deal is expected to close by the early 2016.
Strategic Hotels & Resorts CEO Raymond Gellein said, “Our board and management team have consistently stated that we would consider any opportunity that maximizes stockholder value.” He also added, “We believe this transaction capitalizes on our unique portfolio, strong asset management platform and continues operating outperformance over the past several years. The beard thoroughly considered various alternatives over the course of the past few years, and this all cash offer from Blackstone creates significant stockholder value with a high degree of execution certainty. ”
To acquire Strategic, Blackstone may land up in giving away its assets individually to investors seeking prime properties just like the way the company has been doing with buildings acquired in its 2007 takeover of Equity Office Properties Trust, stated Ian Weissman of Credit Suisse Group AG in New York. “What Blackstone is very good at is being this wholesale-to-retail buyer,” said Weissman. “They buy portfolios of assets and then sell them to interested parties. Wealthy individuals don’t want to own a portfolio of assets, they want to own a single trophy asset.”
Tyler Henritz, co-head of US acquisitions for Blackstone Real Estate added, “We are excited about the opportunity to acquire one of the highest quality luxury hotel portfolios in the U.S. As long-term investors in the lodging industry, we remain confident in the fundamentals of the sector despite recent market volatility.”
Blackstone shares climbed 5.2% to close at $35.41 while Strategic’s share value increased to 3.5% to $14.07.