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Merger Arbitrage Mondays – Extended Stay America Receives A Bump

  • June 7, 2021

Merger activity increased last week with five new deals announced and four deals completed. Three of the five deals announced last week were regional bank deals. We wrote the following about consolidation among regional banks in our June Special Situations newsletter:

Beyond IPOs and buybacks, another trend we have noticed in the last several months is consolidation in the media and banking industry. Despite low interest rates impacting net interest margins and potential disruption from fintech companies, banks have done well on account of increased loan activity and fee-based revenue. The CARES Act and its associated PPP loans to businesses provided additional tailwinds to banks and especially regional banks. These tailwinds combined with significant consolidation among regional banks has helped SPDR S&P Regional Banking ETF (KRE) notch gains of over 80% during the last year and more than 36% year-to-date. More than 15 out of the 89 active deals we track in our Merger Arbitrage Tool are bank mergers. I expect this trend to continue and rising interest rates will continue to help the banking sector unless we run into a recession.

Another highlight from last week was the bidding war for Extended Stay America (STAY). In April 2020, The Blackstone Group acquired a 4.9% stake in the company and Starwood Capital Group acquired an 8.5% stake in the company. On March 15, 2021, the company entered into a definitive agreement to be acquired by Blackstone Real Estate Partners and Starwood Capital Group. Tarsadia Capital, the bidding competitor also acquired a 3.9% stake in the company in May of last year. Tarsadia has been urging the shareholders of Extended Stay to vote against the sale of the company to Blackstone and Starwood. On June 1, 2021, Blackstone and Starwood Capital amended the deal stating that they will now pay STAY shareholders an additional $1.00 per share in cash for a total consideration of $20.50 per share in cash. The transaction has received all regulatory approvals and is on track to close on June 16, 2021, pending shareholder approval at the reconvened special meetings that are to be held on June 11, 2021.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

There was one new deal announced in the Deals in the Works section last week.

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