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Buyout News Sends Shares of Spartanburg, S.C.-Based Hotel Chain Soaring

By Ben Werner, The State, Columbia, S.C.
Knight Ridder/Tribune Business News

Mar. 9--Wall Street went gaga over Extended Stay America stock Monday, the first day of trading since Friday's announcement that it would sell out to a New York investment firm.

The stock closed Monday at $19.24 -- a 22 percent jump over Friday's close -- and near the $19.625 per share offer made Friday for the company by New York-based investment firm The Blackstone Group.

Nearly 12 million shares changed hands Monday -- 34 times the volume of a typical day.

Two major ratings services -- Moody's and Standard & Poor's -- were not as impressed with the deal. Both threatened to lower their ratings on the Spartanburg hotel chain's bonds to junk status. Their reasons: The extended stay hotel market is soft, and the new buyers are picking up more debt.

The $3.3 billion deal gives Extended Stay's original investors a 200 percent return for their money, George D. Johnson, Extended Stay's co-founder and chief executive, said Monday in a call with Wall Street analysts.

The Extended Stay chain has 475 hotels with 10 under construction this year. Johnson moved the company's headquarters to Spartanburg in 2001.

Extended Stay will remain a distinct brand under Blackstone's ownership, but it will be managed by the 132-unit, extended stay hotel chain Homestead Studio Suites.

When asked by analysts about management changes, Johnson did not answer directly, simply saying, "We have duplicate functions." He told company management on Friday that Spartanburg could expect to lose some jobs, but he built high costs into the deal to keep the chain in the city.

Johnson has another company, payday loan provider Advance America, based in Spartanburg.

Johnson and his wife SuSu Phifer Johnson, through their Phifer/Johnson Foundation, have donated several million dollars to charities and colleges in South Carolina.

The Blackstone Group is a private investment bank with offices in New York, London and Hamburg. It was founded in 1985 and has raised four funds worth about $4 billion in total equity. The group has made more than 100 separate investments in hotels, offices and other commercial properties with a total transaction value exceeding $13 billion.

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(c) 2004, The State, Columbia, S.C. Distributed by Knight Ridder/Tribune Business News. ESA,

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