US: Three directors who have been nominated to the board at Extended Stay America Inc by said on Tuesday that a proposed sale undervalues the company and they can help create value as board members if the company remains independent.
“We believe we can help the company create value for shareholders that is well in excess of $19.50 per share,” said the three, who were nominated to the board by Tarsadia Capital LLC, before the company announced plans for a $6 billion to Blackstone Group and Starwood Capital Group.
In an open letter to ESA shareholders, Ross Bierkan, Stephen Joyce and Michael Leven said they are acting independently of Tarsadia, the family office that owns 3.9 per cent of Extended Stay America and nominated them to the board, and of each other.
They wrote: “The three of us have deep experience in the hospitality industry, having run major hotel chains and asset portfolios. We know this business. And we believe a standalone Extended Stay has a significant opportunity to create value for shareholders, if the company pursues the right strategy and executes it well.”
“We believe that this strong brand and base of assets have underperformed their potential and missed out on a number of attractive value creation opportunities over the years. We believe the sale substantially undervalues STAY and ignores the potential for the company to benefit from a general lodging industry recovery and a number of policy changes that directly benefit STAY.”
We believe there is embedded value in the real estate that is materially accretive. We also note that the company’s franchise efforts have been inconsistent and there is substantial potential to collaborate with developers and franchisees to accelerate new unit growth. We believe the capital expenditure needs of the company are manageable, and that operational, capital allocation, corporate structure and strategic (both asset sales or a sale of the whole company) opportunities abound. We look forward to bringing our expertise to the board, once the sale is rejected and the annual meeting is held. We believe we can help the company create value for shareholders that is well in excess of $19.50 per share.”
Extended Stay America CEO Bruce Haase disagreed, saying shareholders recognise the “dangerous potential outcomes and immediate value destruction” from opposing the sale, which was at the “right price” at the “right time”.
Leven was previously president of Las Vegas Sands, Joyce was formerly chief executive officer of Choice hotels where he oversaw the franchise system, and Bierkan was CEO of RLJ Lodging Trust.
