Item 1.01 – Entry into a Material Definitive Agreement.
Amendment to Merger Agreement
On May 31, 2021, Extended Stay America, Inc. (the “Company”), and its paired share Real Estate Investment Trust, ESH Hospitality, Inc. (“Hospitality” and together with the Company, the “Paired Entities”), entered into an Amendment to that certain Agreement and Plan of Merger, dated March 14, 2021 (the “Merger Agreement”), by and among the Paired Entities, Eagle Parent Holdings L.P., a Delaware limited partnership (“Parent”), Eagle Merger Sub 1 Corporation, a Delaware corporation and wholly owned subsidiary of Parent (“MergerCo 1”), and Eagle Merger Sub 2 Corporation, a Delaware corporation and wholly owned subsidiary of MergerCo 1 (“MergerCo 2”) (the “Amendment”). Parent, MergerCo 1 and MergerCo 2 are directly or indirectly owned 50% by Blackstone Real Estate Partners IX, L.P., which is an affiliate of The Blackstone Group Inc., and 50% by SAR Public Holdings, L.L.C. and its affiliate, Starwood Distressed Opportunity Fund XII Global, L.P.
The Amendment increases the consideration to be paid with respect to each issued and outstanding paired share of the Paired Entities (each a “Paired Share”) (consisting of a share of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”) paired with a share of class B common stock, par value $0.01 per share, of Hospitality (the “Hospitality Class B Common Stock”)) at the effective time of the mergers to $20.50 per Paired Share in cash, subject to adjustment for the special dividend described below (the “Merger Consideration”), without interest thereon.
The Merger Agreement as amended by the Amendment, and the transactions contemplated thereby, were unanimously approved by both the Company’s board of directors and Hospitality’s board of directors.
The foregoing description of the terms of the Amendment is not complete and is qualified in its entirety by reference to the copy of the Amendment filed as Exhibit 2.1 hereto and incorporated herein by reference.
Under the terms of the Merger Agreement, Parent has requested that the Company pay a special dividend of $1.75 per share of Company Common Stock. Accordingly, the board of directors of the Company intends to declare a special dividend of $1.75 in cash per share of Company Common Stock payable immediately before the effective time of the proposed mergers to holders of record as of the close of business on the day before the date on which the effective time of the proposed mergers will occur (which we refer to as the “special dividend”). The Merger Consideration will be reduced by the amount of such special dividend. If (but only if) the Merger Agreement, as amended, is approved by the stockholders of the Paired Entities and the other conditions to the closing of the mergers are satisfied or waived, the special dividend will be payable on June 16, 2021, to holders of record of Company Common Stock as of the close of business on June 15, 2021 and the effective time of the mergers will occur on June 16, 2021.
In order to ensure that the stockholders of the Paired Entities have sufficient time to consider the Merger Agreement, as amended, the boards of directors of the Paired Entities authorized the adjournment of the Special Meetings of the Stockholders scheduled for June 8, 2021. The Special Meeting of the Stockholders of the Company will be reconvened on June 11, 2021, at 8:30 a.m., Eastern Time, and the Special Meeting of the Stockholders of Hospitality will be reconvened on June 11, 2021, at 9:30 a.m., Eastern Time. The reconvened Special Meetings will be held exclusively online via a live audio webcast at www.virtualshareholdermeeting.com/STAY2021SM. The record date for the Special Meetings will remain April 19, 2021.
In addition, on June 1, 2021, the Paired Entities issued a press release announcing (1) the execution of the Amendment, (2) the adjournment of the Special Meetings and (3) the Company’s board of director’s intention to pay a special dividend of $1.75 per share in respect of each share of Company Common Stock included in each Paired Share. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.