Another day with another private equity buyout, but this one hits a bit closer to home. Income Investor selection Equity Inns (NYSE: ENN) has agreed to be acquired by Whitehall Street Global Real Estate for $23 a share. For the curious type who likes to keep track of who's doing the buying, Whitehall is an affiliate of Goldman Sachs (NYSE: GS).
The near-20% premium to the recent share price of Equity Inns is nothing to turn your nose up at, but as someone who had Equity Inns on my watch list, I have to admit that it's bittersweet to see the company's hefty yield going away -- not to mention the regular increases the company made to its dividend the last two years as business picked up and the company realigned its portfolio of hotels to younger properties with stronger brand names.
Equity Inns' focus on properties that cater to extended stays and business travel at a reasonable price makes the company's results more predictable and somewhat more attractive than hotels more focused on tourism. This leads to more predictable cash flows, which I suspect made the transaction attractive to Whitehall.
The possibility of Equity Inns being acquired had been rumored two weeks ago, causing the shares to briefly run up to $21 a share, so the announcement of the acquisition isn't entirely surprising. The company's most recent proxy statement provided another hint that a buyout was possible with the disclosure of more favorable terms if a change in control were to take place.
While Equity Inns' parting might be a bit sad, subscribers to Income Investor can't be too disappointed with the end result. Since being selected in January of 2005, Equity Inns has provided a total return of 115%. That return easily bests the 29% return for the S&P 500, but more importantly, it tops the 56% return of the DJ Wilshire REIT ETF (AMEX: RWR) over the same time period.
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