Both Leading Independent Proxy Advisory Firms Recommend Extended Stay America Shareholders Vote AGAINST Proposed Sale to Blackstone and Starwood
Glass Lewis Joins ISS in Raising Major Concerns Around Sale Process, Valuation and Timing
Agrees with Tarsadia That STAY Has Paths to Greater Value Creation as a Standalone Entity
Follow ISS's and Glass Lewis's Recommendations and VOTE on the GOLD Card AGAINST the Proposed Sale
Tarsadia Capital, LLC together with its affiliates, associates and funds it manages ("Tarsadia"), today announced that both leading independent proxy advisory firms, Institutional Shareholder Services Inc. ("ISS") and Glass, Lewis & Co., LLC ("Glass Lewis") have recommended that Extended Stay America, Inc. (NASDAQ:STAY) ("STAY" or the "Company") shareholders VOTE AGAINST the proposed sale of the Company to Blackstone Real Estate Partners and Starwood Capital Group (the "Sale") at the Special Meeting scheduled for June 8, 2021.
In its report, Glass Lewis concluded:1
- "[W]e have outstanding concerns with the process leading to the proposed transaction agreement, with the timing of the proposed sale of the Company and with the value of the consideration to be received by Extended Stay shareholders."
- "We also question the timing of the proposed transaction given the potential benefits of Extended Stay continuing as a stand-alone entity, including the potential upside from a lodging recovery and the value that could be created from executing the Company's business plan, in our view."
- "Furthermore, we do not believe the proposed consideration offers a compelling value or exit point for Extended Stay shareholders, including based on the implied market premium and relative to peer trading multiples and multiples paid in precedent industry transactions."
Specific to the Company's poorly run sales process, Glass Lewis noted:
- "[W]e see that the proposed transaction follows a closed sale process through which the Extended Stay board did not solicit interest from alternative parties regarding a potential sale of the Company prior to entering into the proposed transaction agreement with Blackstone and Starwood."
- "In our view, Blackstone and Starwood represent two of the most likely potential bidders for the Company and we expect their cooperation may have eliminated a degree of competitive tension that could otherwise have existed in the sale process."
In assessing the financial aspects of the proposed Sale, Glass Lewis wrote:
- "In considering the valuation work performed by Extended Stay's financial advisor, we believe Tarsadia makes a reasonable observation that the Goldman Sachs fairness opinion, as presented to shareholders, excludes certain relevant analyses that are often included in lodging industry transactions, including a comparable companies analysis or a precedent transactions analysis."
- "Overall, we believe Tarsadia offers a reasonable assessment that the proposed transaction appears to undervalue Extended Stay based on peer trading multiples and multiples paid in precedent transactions."
- "Given that Extended Stay shares have consistently traded above the offer price in since opposition to the deal was announced, we question whether accepting the current offer would be in the best interests of shareholders."
In assessing STAY's go-forward prospects as a standalone entity, Glass Lewis wrote:
- "[W]e believe Tarsadia makes a reasonable case that Extended Stay could be worth more than the proposed purchase price on a stand-alone basis with an improved strategy, as outlined in Tarsadia's stand-alone strategy analysis, predicated on significant asset sales at accretive valuations and other measures."
- "[W]e recognize concerns expressed by Tarsadia and by other shareholders that are publicly opposed to the proposed transaction as well as by the two dissenting members of the Hospitality board that now does not appear to be an appropriate time to sell the Company given the potential upside from a lodging sector recovery and other favorable dynamics, including increasing Covid-19 vaccine distribution, pent-up travel demand and expected federal stimulus."
- "Ultimately we believe Tarsadia has outlined reasonable suggestions to create additional value at the Company on a stand-alone basis, including potential accretive asset sales and financing for new unit development."
ISS also recommended that shareholders vote against the deal, concluding it comes at the wrong time, with the wrong price, and after the wrong process:
Wrong Time
- "Given the potential upside from the sector-wide recovery and company-specific catalysts, the current deal terms do not appear to offer a sufficiently compelling value relative to the standalone scenario."
Wrong Price
- "STAY's own financial advisor's analysis demonstrates that the 15.1 percent premium to the unaffected price is at the lower end of, or even below, what shareholders might expect. The fact that the dissenting directors voiced their unease with the proposed terms substantiates shareholders' concerns regarding the adequacy of the premium."
Wrong Process
- "All in, the circumstances leading up to the transaction, the lack of outreach to any other potential acquirors, and the negotiation process, which lasted less than two months, do not inspire confidence that the proposed transaction represents the best outcome for shareholders, as evidenced by the fact that six different shareholders have publicly raised concerns about the process..."
Tarsadia stated: "We are gratified that both leading independent proxy advisory firms have recommended against this inadequate proposed transaction. We urge all shareholders to follow the recommendations put forth by ISS and Glass Lewis and VOTE AGAINST the Sale to Blackstone and Starwood at the Special Meeting."
Tarsadia Urges STAY Shareholders to Vote AGAINST the Sale on the GOLD Card
For more information about why it is the wrong time and wrong price to sell STAY, please visit: www.ABetterFutureForStay.com.
About Tarsadia Capital
Tarsadia Capital, LLC is the New York-based investment management company of a family office. Tarsadia Capital has a flexible and long-duration investment mandate that focuses on equities and commodities globally. Our investment process employs deep fundamental research on secular inflections to identify and build conviction around asymmetric risk/reward opportunities that will play out over multi-year time horizons.
Disclaimer
Tarsadia Capital, LLC ("Tarsadia"), Ravi Bellur, Michael Ching, Vikram Patel, Ross H. Bierkan, Stephen P. Joyce and Michael A. Leven (collectively, the "Participants") have filed with the Securities and Exchange Commission (the "SEC") a definitive proxy statement and accompanying form of proxy as well as a supplement to the definitive proxy statement to be used in connection with the solicitation of proxies from the shareholders of the Company for the Special Meeting. All shareholders of the Company are advised to read the definitive proxy statement and other documents related to the solicitation of proxies by the Participants, as they contain important information, including additional information related to the Participants. The definitive proxy statement and an accompanying GOLD proxy card will be furnished to some or all of the Company's shareholders and will be, along with other relevant documents, available at no charge on Tarsadia's campaign website at: www.ABetterFutureForStay.com and the SEC website at http://www.sec.gov/.
Information about the Participants and a description of their direct or indirect interests by security holdings is contained in the definitive proxy statement filed by certain of the Participants with the SEC on May 7, 2021 and the supplement to the definitive proxy statement filed by the Participants with the SEC on May 25, 2021. Each of these documents are available free of charge on the SEC website.
This material does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein in any state to any person. In addition, the discussions and opinions in this letter and the material contained herein are for general information only, and are not intended to provide investment advice. All statements contained in this letter that are not clearly historical in nature or that necessarily depend on future events are "forward-looking statements," which are not guarantees of future performance or results, and the words "anticipate," "believe," "expect," "potential," "could," "opportunity," "estimate," and similar expressions are generally intended to identify forward-looking statements.
The projected results and statements contained in this letter and the material contained herein that are not historical facts are based on current expectations, speak only as of the date of this letter and involve risks that may cause the actual results to be materially different. Certain information included in this material is based on data obtained from sources considered to be reliable. No representation is made with respect to the accuracy or completeness of such data, and any analyses provided to assist the recipient of this material in evaluating the matters described herein may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results. Accordingly, any analyses should also not be viewed as factual and also should not be relied upon as an accurate prediction of future results.
All figures are unaudited estimates and subject to revision without notice. Tarsadia Capital disclaims any obligation to update the information herein and reserves the right to change any of its opinions expressed herein at any time as it deems appropriate. Past performance is not indicative of future results. Tarsadia Capital has neither sought nor obtained the consent from any third party to use any statements or information contained herein that have been obtained or derived from statements made or published by such third parties. Except as otherwise expressly stated herein, any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein.
1 Permission to quote ISS and Glass Lewis was neither sought nor obtained. Emphasis added.
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