Choice Hotels International Inc. has made a public proposal to acquire all the outstanding shares of Wyndham Hotels and Resorts Inc at a price of US$90 per share – an offer that has been “unanimously rejected” by Wyndham’s board of directors.
On Tuesday, Choice Hotels went public with its offer to buy Wyndham following six months of negotiations, but the latest US$7.8 billion cash-and-stock acquisition offer has been described by Wyndham as “highly conditional, unsolicited” and “underwhelming”.
A potential merger would see the joining of Choice Hotels’ brands such as Econo Lodge, Quality Inn and Clarion with Wyndham’s Days Inn and Travelodge.
“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,” Choice Hotels President and CEO, Patrick Pacious, said on Tuesday.
“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 traveller 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.”
Following discussion with financial and legal advisors Wyndham’s board determined that the offer is not in the best interest of shareholders.
With nearly 1.5 million rooms worldwide between the two hotel groups, Wyndham also cited regulatory risks among its concerns.
“Choice’s offer is underwhelming, highly conditional, and subject to significant business, regulatory and execution risk,” said Wyndham Board of Directors Chairman, Stephen P. Holmes.
“Choice has been unwilling or unable to address our concerns. While our board would support a value-maximising 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.”
Wyndham said it has engaged with Choice and its advisors “on multiple occasions” to explore these risks, however, the company said, “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,” Holmes added.