Wyndham Hotels & Resorts rejected an unsolicited $8 billion buyout offer from Choice Hotels, a smaller chain that went public with its bid after negotiations broke down.
Under Choice's proposal, the $90.00 per share to be received by Wyndham shareholders would consist of $49.50 in cash and 0.324 shares of Choice common stock for each Wyndham share they own.
The proposal implies a total equity value for Wyndham of approximately $7.8 billion on a fully diluted basis. With the assumption of Wyndham's net debt, the proposed transaction is valued at approximately $9.8 billion.
Choice is making its latest proposal public following Wyndham's decision to disengage from further discussions with Choice, following nearly six months of dialogue.
Patrick Pacious, President and Chief Executive Officer of Choice Hotels, said, "We have long respected Wyndham's business and are confident that this combination would significantly accelerate both Choice's and Wyndham's long-term organic growth strategy for the benefit of all stakeholders. For franchisees, the transaction would bring Choice's proven franchisee success system to a broader set of owners, enabling them to benefit from Choice's world-class reservation platform and proprietary technology to drive cost savings and greater investment returns. Additionally, the value-driven leisure and business traveler would benefit from the combined company's rewards program, which would be on par with the top two global hotel rewards programs, enabling them to receive greater value and access to a broader selection of options across stay occasions and price points."
Wyndham, which runs Days Inn, La Quinta, Ramada and a host of other brands, called the proposal “opportunistic” and said that it undervalues its growth potential. The offer was rejected unanimously by its board, the company said.
“Choice's offer is underwhelming, highly conditional and subject to significant business, regulatory and execution risk," Wyndham Chairman Stephen Holmes said in a prepared statement. "Choice has been unwilling or unable to address our concerns.”
Wyndham has engaged Choice and its advisors’ multiple times to explore the risks of a potential deal, Holmes said, but decided it would likely take more than a year to determine what would be required to clear antitrust review.
Choice Hotels International said it went public with its bid after six months of negotiations broke down.
“A few weeks ago, Choice and Wyndham were in a negotiable range on price and consideration, and both parties have a shared recognition of the value opportunity this potential transaction represents, said Choice CEO Patrick Pacious. ” We were therefore surprised and disappointed that Wyndham decided to disengage. While we would have preferred to continue discussions with Wyndham in private, following their unwillingness to proceed, we feel there is too much value for both companies’ franchisees, shareholders, associates, and guests to not continue pursuing this transaction."
Wyndham shareholders, under the most recent offer, would be able to choose either cash, stock, or a combination of cash and stock. Wyndham would also get two seats on the new board.
The deal has a total value of about $7.8 billion. When including debt, it's valued at approximately $9.8 billion. Choice operates about 7,500 hotels in 46 countries. It's seeking to absorb a much larger chain in Wyndham, which operates nearly 9,300 hotels that also include Howard Johnson, Super 8 and Travelodge.
Wyndham, based in Parsippany, New Jersey, posted a profit of $355 million last year with revenue of $1.5 billion.
Wyndham's shares are up more than 170% since its stock price tumbled close to $25 each at the start of the pandemic.
