Choice Hotels goes hostile in $8 billion takeover bid for Wyndham after being repeatedly rebuffed

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This article was published 12/12/2023 (981 days ago), so information in it may no longer be current.

Choice Hotels is launching a hostile takeover offer for Wyndham Hotels & Resorts after repeated attempts to reach a deal with the rival hotel chain were rebuffed.

Choice Hotels said Tuesday that its exchange offer to shareholders of Wyndham, which runs Days Inn, La Quinta, Ramada and a host of other brands, is the same as its last bid to company management, which was $49.50 in cash and 0.324 shares of Choice common stock per Wyndham share. The exchange offer gives Wyndham shareholders the chance to choose to receive all cash, all shares or a combination of the two.

The offer puts the value of the deal for Wyndham, the larger of the two chains, at about $8 billion.

“While we would have preferred to come to a negotiated agreement, the Wyndham Board’s refusal to explore a transaction has left us with no choice but to take our proposal directly to Wyndham’s shareholders,” Choice CEO Patrick Pacious said in a prepared statement. “Wyndham chose to publicly reject our last proposal without any engagement even after we addressed their concerns, including adding significant regulatory protections for their shareholders.”

Pacious said that Choice continues to seek a “mutually agreeable transaction” and said that can still happen with the potential for “additional value to be unlocked if Wyndham were to return to the negotiating table and provide due diligence.”

Pacious said that the company will be meeting with Wyndham’s shareholders in the days and weeks ahead and that it is starting the regulatory approval process this week.

Choice has been trying to work out a deal for Wyndham for some time, but has been held at arm’s length. In October Wyndham rejected an unsolicited $8 billion buyout offer from Choice. At the time, Wyndham, called the proposal “opportunistic” and said that it undervalued the company’s growth potential. The offer was rejected unanimously by its board.

Wyndham Chairman Stephen Holmes also said in October that Choice’s bid was “subject to significant business, regulatory and execution risk,” and that Choice had been unable to address Wyndham’s concerns.

Choice has said that it went public with the bid after six months of negotiations broke down. The company made a private proposal to Wyndham in mid-November that included $49.50 in cash and 0.324 shares of Choice stock for each share of Wyndham stock. It also offered Wyndham two seats on the combined company’s board. Wyndham rejected the proposed offer last month.

Choice said Tuesday it’s still willing to offer two seats on the combined company’s board, along with a reverse termination fee consistent with terms in its November proposal.

Wyndham, which is based in Parsippany, New Jersey, said in a release Tuesday that its board will evaluate Choice’s offer to determine a course of action that it feels best serves the company and its shareholders.

Wyndham is urging its stockholders not to take any action until the board announces its recommendation.

The exchange offer is set to expire on March 8, 2024 unless extended or terminated. Choice said that it’s committed to completing the transaction within a year.

Choice said it currently holds about 1.5 million shares of Wyndham Hotels & Resorts Inc. shares valued at more than $110 million. It is planning to nominate a slate of directors to Wyndham’s board at Wyndham’s 2024 annual shareholders meeting.

Wyndham posted a profit of $355 million last year with revenue of $1.5 billion.

Hotels have experienced a surge in businesses over the last several years. An uptick in travel has lead to snarled airports and pilot shortages. That has cooled a bit this year as people become more cost conscious about their trips due to inflation and after spending more freely for more than a year.

Choice Hotels International Inc., which is based in Rockville, Maryland, runs about 7,500 hotels in 46 countries. It’s seeking to absorb a much larger chain in Wyndham, which operates more than 9,000 hotels that also include Howard Johnson, Super 8 and Travelodge.