Wyndham Worldwide Corporation and La Quinta Holdings Inc have revealed they have entered into a definitive agreement under which Wyndham Worldwide will acquire La Quinta’s hotel franchise and hotel management businesses for AUD$2.44 billion (USD$1.95 billion) in cash.

The massive acquisition, which has been the talk of the 2018 Americas Lodging Investment Summit (ALIS) in Los Angeles this week (Jan 22), is expected to close in the second quarter of 2018.

Under the terms of the agreement, stockholders of La Quinta will receive USD$8.40 per share in cash (approximately USD$1.0 billion in aggregate), and Wyndham Worldwide will repay approximately USD$715 million of La Quinta debt net of cash and set aside a reserve of USD$240 million for estimated taxes expected to be incurred in connection with the taxable spin-off of La Quinta’s owned real estate assets into CorePoint Lodging Inc.

Immediately prior to the sale of La Quinta to Wyndham Worldwide, La Quinta will spin off its owned real estate assets into a publicly-traded real estate investment trust, CorePoint Lodging.

Wyndham’s Hotel Group is the world’s largest hotel business based on number of properties. With the acquisition of La Quinta’s asset-light, fee-for-service business consisting of nearly 900 managed and franchised hotels, Wyndham Hotel Group will span 21 brands and over 9,000 hotels across more than 75 countries.

The addition of La Quinta, one of the largest midscale brands in the industry, will build upon Wyndham Hotel Group’s strong midscale presence, expand its reach further into the fast-growing upper-midscale segment.

The La Quinta Returns loyalty program, with its 13 million enrolled members, will be combined with the award-winning Wyndham Rewards program, with its 53 million enrolled members.

“La Quinta will immediately become one of our flagship brands,” said Wyndham Hotel Group President and Chief Executive Officer, Geoff Ballotti. “It is an exceptionally strong brand that is led by service-minded associates who deliver some of the highest customer engagement levels in our industry.

“We expect that La Quinta guests and franchisees will benefit from our intense focus on product quality and our best-in-class technology, digital, loyalty and distribution platforms.

“This acquisition also significantly expands our hotel management business and provides us with substantial new opportunities to drive increased growth in our business,” he said.

Wyndham’s Geoff Ballotti

The transaction, which has been approved by the boards of directors of both companies, is expected to close upon the completion of the planned spin-off of La Quinta’s owned real estate assets into the separate entity. Closing is subject to approval by La Quinta stockholders, regulatory and government approval and the satisfaction of other customary closing conditions.

Wyndham Worldwide Chairman and Chief Executive Officer, Stephen P. Holmes, said: “This transaction builds on Wyndham Worldwide’s proven track record of acquiring companies that are a strong strategic and cultural fit, add highly-regarded brands to our portfolio and offer clear opportunities to drive shareholder value through growth, shared best practices and sharp execution.”

La Quinta President and Chief Executive Officer, Keith Cline, added: “As we anticipated, the separation of our businesses is enabling greater strategic clarity and allowing our company to take advantage of growth opportunities that naturally flow from each business model.

“To that end, we are excited to announce the addition of the La Quinta franchise and management businesses to Wyndham Hotel Group’s portfolio.

“We believe that, under the management of Wyndham’s seasoned team of executives, the La Quinta portfolio will grow and thrive, yielding long-term benefits to the stakeholders of both companies,” he said.

La Quinta also announced that Cline has been appointed President and Chief Executive Officer of CorePoint Lodging effective upon completion of the planned spin-off.

Wyndham Worldwide also says the planned spin-off of Wyndham Hotel Group remains on track for an expected distribution in the second quarter of 2018.

Barclays is acting as exclusive financial advisor and Kirkland & Ellis LLP is acting as legal advisor to Wyndham Worldwide. Barclays and Deutsche Bank are providing committed financing to Wyndham Worldwide in connection with the transaction. J.P. Morgan is acting as exclusive financial advisor and Simpson Thacher & Bartlett LLP is acting as legal advisor to La Quinta. J.P. Morgan is providing committed financing to CorePoint Lodging in connection with the transaction.

James Wilkinson

Editor-In-Chief, Hotel Management