Rockville’s Choice Hotels International recently went public with its bid to acquire rival brand Wyndham Hotels & Resorts, with a combined $9.8 billion offer that included $7.8 billion in combined cash and stock and another $2 billion in assumed debt. Wyndham rejected the offer, saying it presents unacceptable risk to its shareholders. This comes a little over a year after Choice acquired Radisson Hotels in August 2022.
Per a recent release, Wyndham’s Board of Directors, together with its financial and legal advisors, closely reviewed Choice’s latest proposal with a nominal value of $90 per share, comprised of 45 percent in stock and 55 percent in cash and determined that it is not in the best interest of shareholders to accept the proposal. In rejecting Choice’s proposal, the Wyndham Board of Directors determined that:
- the proposed transaction involves significant business and execution risks, including an extended regulatory timeline and uncertainty of outcome, potential franchisee churn, and excessive leverage levels at the pro forma combined company
- the consideration mix includes a significant component of Choice stock, which the Board believes is fully valued relative to Choice’s growth prospects, especially when compared to Wyndham
- the offer is opportunistic and undervalues Wyndham’s future growth potential
“Choice’s offer is underwhelming, highly conditional, and subject to significant business, regulatory and execution risk. Choice has been unwilling or unable to address our concerns,” said Stephen P. Holmes, Chairman of the Wyndham Board of Directors. “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. 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. 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.”
Wyndham’s full response can be seen here.