Wyndham’s Board of Directors Unanimously Rejects Choice Hotels’ Purchase Proposal

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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