Equity Inns Goes for $2.2 Billion; Other Hotel Companies May Be Undervalued

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Includes: ENN, GS
by: Jonathan Liss

Playing off the growing strength of the U.S. lodging industry, Equity Inns, owner of 132 limited-service hotels and motels, has agreed to be taken private by Goldman Sachs' Whitehall Street Global Real Estate LP for $2.2 billion, including debt.enn Without debt the price is $1.27 billion, or $23/share, a 19% premium to Wednesday's closing price. Equity Inns' shares were up 25% YTD before the announcement. The deal is expected to close in the fourth quarter, pending shareholder approval; the board supports the deal. Equity Inns counts Hampton Inn and Courtyard by Marriott among its better known brand names, and generally operates in areas with lower entry barriers for competitors. Since 9/11, the hotel industry has rebounded, with supply of new rooms failing to keep pace with growing demand. According to Smith Travel Research, the average daily room rate rose 7.2% in 2006 to $97.61, lifting industry profits to a record $26.6 billion. Lodging industry analyst Will Marks: "This is as high of a price as we've ever seen for a limited-service hotel company. If this is a statement of an accurate value for hotels, then the rest of the publicly traded hotel companies are trading at 20% or greater discounts to net asset value."

Sources: Press Release, Reuters, Bloomberg, Wall Street Journal, MarketWatch
Commentary: Seeking Alpha/HotelsEight Hotel Stocks To Watch This Summer
Stocks/ETFs to watch: Equity Inns, Inc. (ENN), Goldman Sachs (NYSE:GS). Competitors: Hospitality Properties Trust (NYSE:HPT), FelCor Lodging Trust Incorporated (NYSE:FCH), Sunstone Hotel Investors (NYSE:SHO), Innkeepers USA Trust (KPA), Ashford Hospitality Trust (NYSE:AHT)
Related: Equity Inns Homepage

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