[Update, Oct. 17] Wyndham Hotels & Resorts' board of directors on Tuesday rejected the $7.8 billion acquisition offer publicly issued by Choice Hotels International, and said in a statement that "it is not in the best interest of shareholders to accept the proposal."
"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 Wyndham board chairman Stephen Holmes in a statement. "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."
Wyndham in the statement cited an uncertain regulatory future of the potential combination of the two hotel companies and added that Choice's offer "is opportunistic and undervalues Wyndham's future growth potential."
"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," according to Holmes.
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."
Choice Hotels International has proposed to acquire Wyndham Hotels & Resorts for $90 a share in a cash and stock offer of $7.8 billion, the hotel company announced Tuesday. Including Wyndham’s debt, Choice values the full deal at approximately $9.8 billion.
Choice made its acquisition proposal public following Wyndham's decision to "disengage from further discussions with Choice, following nearly six months of dialogue," Choice said in a statement. Choice representatives would not comment further at this time, a company spokesperson told BTN.
The proposal includes an offer of $90 per share to Wyndham shareholders through a mix of $49.50 in cash and 0.324 shares of Choice common stock, the company said. This proposal includes a cash or stock option, meaning Wyndham shareholders could choose cash, stock or a combination of the two, according to Choice.
The value of the proposal represents a "26 percent premium to Wyndham's 30-day volume-weighted average closing price ending on October 16, 2023," according to Choice. This also includes an "11 percent premium to Wyndham's 52-week high, and a 30 percent premium to Wyndham's latest closing price," the company said.
"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," Choice CEO and president Patrick Pacious said in a statement, adding the hotel company was "surprised and disappointed" at Wyndham's decision to disengage privately from negotiations.
"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," he added. Pacious also addressed the potential "long-term organic growth" for both companies through the proposed acquisition.
Wyndham did not immediately make a public statement.
The proposed acquisition follows whispers this summer of a potential acquisition of Wyndham by Choice. The topic was first sidestepped by Wyndham in July and then by Choice in August—a suggestion Pacious called "market rumors," at the time.
Choice on Tuesday said it sent an initial letter proposing to acquire Wyndham in April 2023. The original deal was set at $80 per share, comprising 40 percent cash and 60 percent Choice stock, the company said.
Wyndham rejected that proposal and refused to engage in further discussions, according to Choice.
Choice then increased its proposal in the following weeks to entice Wyndham to engage, which the hotel company did, according to Choice. Conversations continued through September until the hotel company reached its "best and final offer," the company said.
Following this, "Wyndham acknowledged the strategic rationale of the proposal and that terms were within a negotiable range but raised questions regarding the value of Choice stock and timing for obtaining regulatory approvals," according to Choice. Choice then proposed "a one-way, short-term non-disclosure agreement," to which Wyndham "made clear" its "unwillingness" to proceed with further negotiation discussions during a follow-up phone call between both companies.
A strategic acquisition bid is familiar territory for Choice, following the company's deal to buy Radisson Hotel Group Americas in 2022.