NEW YORK (TheStreet) -- Shares of Strategic Hotels & Resorts (BEE) were gaining 3.5% to $14.07 on heavy trading volume Tuesday morning following the announcement that investment firm Blackstone (BX) - Get Report will acquire the hotel operator for $6 billion, including debt.
Blackstone will pay $14.25 a share to acquire Strategic Hotels & Resorts. The offer price represents a 13% premium over unaffected intra-day trading price on July 23 when reports that Strategic Hotels & Resorts was looking to sell itself first emerged.
The acquisition is expected to close in the first quarter of 2016.
"We believe this transaction capitalizes on our unique portfolio, strong asset management platform and continued operating outperformance over the past several years," Strategic Hotels & Resorts Chairman and CEO Raymond L. "Rip" Gellein said in a statement. "The board thoroughly considered various alternatives over the course of the past few years, and this all cash offer from Blackstone creates significant stockholder value with a high degree of execution certainty."
About 5.1 million shares of Strategic Hotels & Resorts were traded by 9:42 a.m. Tuesday, above the company's average trading volume of about 2.7 million shares a day.
TheStreet Ratings team rates STRATEGIC HOTELS & RESORTS as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate STRATEGIC HOTELS & RESORTS (BEE) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 28.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- STRATEGIC HOTELS & RESORTS has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, STRATEGIC HOTELS & RESORTS turned its bottom line around by earning $0.68 versus -$0.11 in the prior year. For the next year, the market is expecting a contraction of 64.0% in earnings ($0.25 versus $0.68).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 92.4% when compared to the same quarter one year ago, falling from $88.01 million to $6.70 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, STRATEGIC HOTELS & RESORTS's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: BEE Ratings Report