Blackstone Buys Hotel Group Wyndham International

Private equity group Blackstone has agreed to buy hotel owner and franchiser Wyndham International Inc in a deal valued at USD 3.24 billion, Wyndham confirmed recently.

The Dallas-based company said Blackstone will pay USD 1.15 per share as part of the deal, while holders of Wyndham's preferred stock will receive USD 72.17 per share in cash. The hotel company completed a string of non-core asset sales this spring, an effort aimed at refinancing debt and simplifying its structure after shedding about 185 properties for USD 2.7 billion in recent years. Blackstone refused to provide additional comment, and a Wyndham spokeswoman said she revert with further details. Both companies expect the deal to close in the fourth quarter this year.

Shares of Wyndham rose 15 cents or 15.5 per cent to USD 1.12 in morning trade on the New York Stock Exchange. Wyndham, which owns and runs upscale hotels in North America, the Caribbean and Europe, had also been entertaining interest for its assets from other players within the hotel industry, sources have said.

Other bidders were said to include Starwood Hotels & Resorts Worldwide, Marriott International and InterContinental Hotels Group.

Wyndham announced a USD 1.65 billion refinancing last month that covered 90 per cent of its outstanding debt. In April, it said its Series A and B preferred stock would be converted into common stock as part of a recapitalisation deal that would hand preferred shareholders ownership of about 85 per cent of the company.

The Wyndham deal is the latest in a series of merger and acquisition deals in the hotel industry over the past year. There were more mergers and acquisitions of hotel companies or brands in 2004 than any year since 1998, when M&A activity peaked at 25 deals totaling almost USD 35 billion.

Last year, a total of 10 deals worth about USD 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,'' Bjorn Hanson, global leader of PricewaterhouseCoopers Hospitality & Leisure Practice, 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 was in the past, and limited growth in new supply, Hanson said.