Hotel Deal Transaction (Hot!!!)

Blackstone to buy hotelier Wyndham International



Tuesday June 14, 2:28 PM EDT


By Jui Chakravorty

NEW YORK (Reuters) - Private equity group Blackstone has agreed to buy hotel owner and franchiser Wyndham International Inc. (WBR) for $1.44 billion in cash, Wyndham said on Tuesday.

With the assumption of about $1.8 billion in debt, Wyndham valued the deal at $3.24 billion, Wyndham spokeswoman Darcie Brossart said.

Blackstone, which has bought three lodging chains this year, will pay $1.15 per common share, an 18.6 percent premium to Wyndham's closing price on Monday. Holders of Wyndham's preferred stock will receive $72.17 per share in cash.

Analysts said the deal valued Wyndham at 14 times 2005 earnings before interest, taxes, depreciation and amortization, while some larger rivals are trading at about 12 times their EBITDA.



"This a very attractive multiple, and a great deal for Wyndham and its shareholders," Robert LaFleur, a lodging analyst at Susquehanna Financial Group, said.

Shares of Wyndham were up 14 cents, or 14.43 percent at $1.11 in late afternoon trading on the New York Stock Exchange.

The hotel company, based in Dallas, has sold about 185 properties for $2.7 billion in recent years as it sought to cut debt, refinance, and simplify its corporate structure.

Both companies expect the deal to close in the fourth quarter this year. Blackstone declined to comment beyond a press statement.

Wyndham, which owns and runs upscale hotels in North America, the Caribbean and Europe, had also been entertaining interest from other bidders including La Quinta Corp. (LQI)and Cendant Corp. (CD), said one analyst, who asked not to be named.

Lou Plasencia, president and chief executive at the consulting firm Plasencia Group, said if Blackstone were to sell the Wyndham brand -- and many analysts expect it will -- it is possible larger rivals such as Starwood Hotels & Resorts Worldwide (HOT), Marriott International (MAR) and Cendant would look into buying it.

Blackstone earlier this year sold the AmeriSuites chain to Hyatt Corp. after buying it as part of an acquisition of Prime Hospitality Corp. in 2004.

In April, Wyndham said its Series A and B preferred stock would be converted into common stock as part of a recapitalization deal that would hand preferred shareholders ownership of about 85 percent of the company.

Wyndham spokeswoman Brossart said on Tuesday the acquisition price is based on the assumption that all preferred stock has been converted.

ROOMS FOR ACQUISITION

The Wyndham deal is the latest in a series of mergers and acquisitions in the hotel industry over the past year. "There's a huge volume of private capital available in hotel assets because they are able to make pretty attractive returns on invested capital," LaFleur said.

"The stock market is pretty volatile and ten-year treasuries are yielding 4 percent, but a hotel asset brings a more attractive yield, relative to options available elsewhere in any asset class," he added.

The hotel industry is generally seen as being at the beginning of a recovery cycle after a substantial downturn in 2001-2003.

Some of the deals in the past year were: Hyatt Hotels' purchase of AmeriSuites, CNL Hospitality Properties' acquisition of KSL Recreation Corp., and Blackstone's takeover of Extended Stay America, Prime Hospitality and Boca Resorts.

Last year, 10 deals worth about $12 billion took place. PricewaterhouseCooper analyst Bjorn Hanson said he expects five to 11 deals in 2005.

"As the lodging industry continues to strengthen in 2005, capital market activity will remain strong," Hanson said.

Some of the elements driving the M&A activity in the industry include forecasts of continued growth in revenue per room and profits in 2006 and beyond, a growing perception the lodging industry is less risky than it has been in the past, and limited growth in new supply, Hanson said. (Additional reporting by Julie MacIntosh)


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