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UPDATE 1-Extended Stay shares rise in debut as U.S. hotel market recovers

Wednesday, 13 Nov 2013 | 10:44 AM ET

* Extended Stay valued at about $4.7 bln at day's high

* Backed by Blackstone, Paulson and Centerbridge

* Headed by former Starbucks CEO James Donald

(Adds details, updates share movement)

Nov 13 (Reuters) - Shares of Extended Stay America Inc rose as much as 19 percent in their market debut on Wednesday, valuing the hotel chain at about $4.8 billion as investors bet on the recovery in the U.S. hotel sector.

The Charlotte, North Carolina-based company raised $566 million after its initial public offering of 28.3 million shares was priced at $20 per share.

Extended Stay shares opened at $22.75 and touched a high of $23.90 on the New York Stock Exchange.

The company, headed by James Donald, former chief executive of Starbucks Corp, was bought for $3.9 billion at a bankruptcy auction in October 2010 by a group including Paulson & Co, Centerbridge Partners and Blackstone Group LP.

Blackstone and Paulson each hold about 27.8 percent in Extended Stay. The private equity owners did not sell any shares in the offering.

Extended Stay, which operates 682 hotels in the United States and Canada, reported a revenue of $313.7 million and a net income of $46.6 million for the quarter ended Sept. 30.

The proceeds of the share sale will be used to help repay its debt, which stood at about $3.6 billion as of June 30.

The company, which operates Crossland Economy Studios and Hometown Inn brands, is betting on a rebound in business travel that has boosted the rates hotels can charge for rooms.

The hotel industry's revenue per available room, a measure of room rates and occupancy levels, is expected to grow by 5.9 percent in 2013 and by 6.2 percent in 2014, according to PricewaterhouseCoopers.

The U.S. lodging industry generated a revenue of more than $162 billion in 2012, according to Smith Travel Research.

The Dow Jones U.S. Hotels index has risen 26 percent this year to Tuesday's close. Shares of Marriott International Inc rose 25 percent in the period, while those of Starwood Hotels and Resorts are up about 29 percent.

SURGING IPO MARKET

Private equity firms have been selling or listing assets to take advantage of a surging IPO market as low interest rates and a rally in the stock markets attract investors.

Blackstone has also filed IPO plans for U.S. hotel operator Hilton Worldwide Inc and is seeking a valuation of about $30 billion, including debt.

Another Blackstone-owned real estate company, Brixmor Property Group Inc, raised about $825 million in October. However, Brixmor Property shares are now trading below their offer price.

Deutsche Bank, Goldman Sachs and J.P. Morgan were the lead underwriters for Extended Stay's offering.

(Reporting by Neha Dimri and Tanya Agrawal in Bangalore; Editing by Kirti Pandey)

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