BlackRock Won’t Save You From Blackstone

BlackRock Won’t Save You From Blackstone

It's time for big, passive investors like FMR LLC (Fidelity), Vanguard Group and BlackRock Inc., sitting on trillions of dollars of assets, to use their heft as shareholders and protect corporate governance standards. It's no longer enough to simply shovel money into index funds and ETFs.

As the global economy stages an uneven recovery from the pandemic, mergers and acquisitions are surging, and valuations are all over the place. Everyone's looking to pounce on a good deal. But investors beware: Those deals may not always be in their best interests. Money managers with substantial stakes must do their part to protect minority shareholders.

Just consider what's transpiring at Extended Stay America Inc.

In March, the US lodging chain announced it was being acquired by Blackstone Group Inc. and Starwood Capital Group 1 for $6 billion. A group of smaller investors, which collectively own just over 14%, were up in arms. They opposed the timing, valuation and low premium on the deal's share price.

Meanwhile, the board, which consists of individuals that were either appointed by or have continuing relationships with Blackstone, rushed the sale, small investors have said. One of them, Tarsadia Capital, suggested Extended Stay's board add directors that had lodging experience. The