Blackstone snags hotel chain for $3.2bn

The private equity firm has agreed to acquire publicly traded hospitality company Wyndham International for approximately $3.2bn from Apollo and Thomas H. Lee, beating out competitors such as Goldman Sachs and Lehman Brothers.

Blackstone Real Estate Advisors, the private equity real estate affiliate of The Blackstone Group, has agreed to acquire upscale hotel operator Wyndham International in a transaction valued at approximately $3.2 billion (€2.7 billion).

The majority owners of Wyndham include private equity firms Apollo Real Estate Advisors, Thomas H. Lee and Beacon Capital, all of whom acquired ownership of the company in a $1 billion private investment in a public entity (“PIPE”) transaction in December 1998. Since that time, the stock price has fallen from over $5 per share to its closing price yesterday of $0.97.

Jon Gray, senior MD, Blackstone

Under the terms of the agreement, Blackstone will acquire the outstanding common and preferred stock of the company for $1.15 per share and $72.17 per share, respectively. The transaction is expected to close in the fourth quarter and has been unanimously approved by Wyndham’s board. Directors of the company include Apollo principals Leon Black, Bill Mack, Lee Neibart and Marc Rowan; Thomas H. Lee principals Thomas H. Lee, Scott Schoen and Scott Sperling; and Beacon Capital chairman and chief executive officer Alan Leventhal. Senior managing director Jonathan Gray led the deal for The Blackstone Group.

Over the past five years, the hotel chain has been actively selling off its non-strategic properties in an effort reduce debt and expand the company’s core brands. Since 1999, Wyndham has sold 185 assets for proceeds of over $2.7 billion. Recently, in December 2004, Wyndham entered into a joint venture with the real estate arm of Lehman Brothers to develop the company’s extended-stay brand, Summerfield Suites – the partnership interest, including the sale of six properties, cost the investment bank $105 million. That same month, Wyndham agreed to sell 25 hotels to Goldman Sachs’ Whitehall Funds, the investment bank’s private equity real estate arm.

Both Goldman Sachs and Lehman Brothers were reportedly competing with Blackstone for the hotel chain, which was being marketed by Bear Stearns. Goldman had reportedly teamed up with KSL Recreation, a hospitality company which had recently been acquired by real estate investment trust CNL Hotels, and Lehman had joined forces with hotel chain La Quinta. Intercontinental Hotels, which recently sold 70 hotels to a group led by Lehman Brothers, was another bidder reportedly interested in the property.

Private equity firms, including Blackstone, have been active investors in the hospitality sector recently. Last year, The Blackstone Group, acquired 475-strong hotel chain Extended Stay America for $1.9 billion and sold its interest in the UK hotel chain The Savoy Group for approximately £750 million. Last month, the firm closed on its purchase of the Rihga Royal, a New York City hotel, for approximately $183 million.