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Asset management firm Ares Management LP has reached an agreement to acquire up to a 20% equity stake in Montage Hotels & Resorts LLC, a luxury hospitality company owned in part by eBay Inc. founder Pierre Omidyar.

Under the agreement, Ares will also provide up to $200 million in equity toward building or acquiring properties for Montage's expansion, Montage President Jason Herthel told The Wall Street Journal. Other financial terms weren't disclosed.

Mr. Herthel said Montage has been in conversations for more than year about partnering or selling a stake in the company as it looked to accelerate its expansion.

The Laguna Beach, Calif., privately held company has five luxury hotels open under the Montage flagship brand and recently launched a high-end lifestyle brand, with more contemporary design and aimed at a younger clientele, known as Pendry Hotels.

Ares, based in Los Angeles, is a publicly traded investment firm with about $92 billion of assets under management in debt, private equity, real estate and other funds.

The first Pendry property, a 317-room hotel, is slated to open this fall in San Diego's Gaslamp entertainment district. While Montage will manage the property, it is owned in part by Ares. That initial partnership evolved into the larger investment, Mr. Herthel said. Ares becomes the third largest stakeholder in Montage.

Hospitality veteran and Montage chief executive officer Alan Fuerstman founded the company in 2002 and took on Mr. Omidyar as a minority partner. The flagship brand aims to compete with top luxury names like Four Seasons and Ritz Carlton.

Montage's deal with Ares is the latest sign that merger and acquisition activity is heating up in the lodging sector. With many analysts saying the hotel business cycle is looking past its prime, a number of hospitality companies view mergers or cash from new equity investors as the best path to growth.

Last year, U.S. hotel deals had a total value of $25.7 billion, the largest amount since 2007. The year was highlighted by Marriott International Inc.'s $12.2 billion agreement to buy Starwood Hotels & Resorts Worldwide Inc. The deal, which would create a company with more than one million rooms and 30 brands, is expected to close at midyear.

Write to Craig Karmin at craig.karmin@wsj.com

(END) Dow Jones Newswires

January 26, 2016 17:35 ET (22:35 GMT)

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