by Donald Wood
Last updated: 8:45 AM ET, Wed October 18, 2023
Wyndham Hotels & Resorts announced that its Board of
Directors unanimously rejected a highly conditional, unsolicited stock-and-cash
proposal by Choice Hotels International.
After consulting financial and legal advisors, Wyndham’s
Board of Directors reviewed Choice’s latest proposal and determined that it is
not in the best interest of shareholders to accept. Choice offered Wyndham $90
per share, comprised of 45 percent in stock and 55 percent in cash.
In response, officials from Wyndham found the proposed deal involves
significant business and execution risks, including an extended regulatory
timeline and uncertainty of outcome, potential franchisee churn, and excessive
leverage levels.
In addition, the consideration mix includes a significant
component of Choice stock, which the Board of Directors believes is fully
valued relative to Choice’s growth prospects, especially when compared to
Wyndham.
Overall, Wyndham said the offer is opportunistic and
undervalues its future growth potential.
“Choice’s offer is underwhelming, highly conditional, and
subject to significant business, regulatory and execution risk,” Wyndham Chairman
Stephen P. Holmes said. “Choice has been unwilling or unable to address our
concerns.”
“While our Board would support a value-maximizing
transaction, given the substantial, unmitigated embedded risks and value
destruction potential presented by the proposed transaction, our Board
determined it is not in the best interests of Wyndham shareholders,” Holmes continued.
“We have engaged with Choice and its advisors on multiple occasions to explore
these risks.”
“However, it became clear the proposed transaction likely
would take more than a year to even determine if, and on what terms, it could
clear antitrust review, and Choice was unable to address these long-term risks
to Wyndham’s business and shareholders,” Holmes said. “We are disappointed that
Choice’s description of our engagement disingenuously suggests that we were in
alignment on core terms and omits to describe the true reasons we have
consistently questioned the merits of this combination – Choice’s inability and
unwillingness to address our significant concerns about regulatory and
execution risk and our deep concerns about the value of their stock.”
In addition to the long period between announcement and
closing or termination of the transaction exposing Wyndham shareholders to the
threat of significant long-term deterioration, the company’s Board sees
Choice’s offer as an attempt to mask their anemic organic growth.
On Tuesday, Choice Hotels outlined its new proposal to
acquire Wyndham for around $7.8 billion in cash and stock. As part of the deal,
Wyndham shareholders would receive $90.00 per share, including $49.50 in cash
and 0.324 shares of its common stock for each share owned. The offer represents
a 30 percent premium to Wyndham’s previous closing price.
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