Asian Hospitality: Edition 220

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News

www.asianhospitality.com

6 ASIAN HOSPITALITY NOVEMBER 2023

onths of rumor were

confirmed true when Choice

Hotels International on

Oct. 17 announced it has proposed

to acquire Wyndham Hotels &

Resorts in an approximately $9.8

billion transaction. The proposal

to Wyndham stockholders came

after months of negotiations broke

down and Wyndham’s board of

directors voted to decline Choice’s

offer, calling it “underwhelming”

and risky.

AAHOA also issued a statement

saying it has “high concern” that a

Choice/Wyndham merger would

give one franchiser too much

dominance over the economy/

limited service hotel segment.

The proposal

In its announcement of the proposal,

Choice said it sought to acquire all the

outstanding shares of Wyndham at a

price of $90 per share, payable in a mix

of cash and stock. Shareholders would

receive $49.50 in cash and 0.324 shares of

Choice common stock for each Wyndham

share they own. Choice claims that is a 26

percent premium to Wyndham's 30-day

volume-weighted average closing price

ending on Oct. 16, an 11 percent premium to

Wyndham's 52-week high, and a 30 percent

premium to Wyndham's latest closing price.

Wyndham shareholders would be able to

choose either cash, stock, or a combination

of cash and stock consideration, subject

to a customary proration mechanism. The

proposal implies a total equity value for

Wyndham of approximately $7.8 billion on a

fully diluted basis.

"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,” said Patrick Pacious, Choice’s

president and CEO.

Choice’s efforts to acquire Wyndham has

been rumored about since June, at which

time both companies denied it. Choice said

negotiations on the deal have been ongoing

for six months.

"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. We

were therefore surprised and disappointed

that Wyndham decided to disengage,”

Pacious said.

In its response, Wyndham outlined its

specific reasons for declining Choice’s offer.

The response

Wyndham’s board unanimously rejected

Choice’s proposal, calling it unsolicited,

“highly conditional” and not in the best

interest of shareholders. They identified

several issues with the proposal, including:

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

Holmes, chairman of the Wyndham

board. "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."

AAHOA gave similar reasons for

opposing the merger.

Concerned about ‘sector

dominance’

In its statement, AAHOA pointed

out that a merged Choice/

Wyndham would have 16,500 hotels

with 46 brands and dominate the economy/

limited service segment.

“As the owners of more than two-thirds of

both Choice Hotels and Wyndham-branded

hotels, AAHOA members have much at

stake with Choice’s potential purchase

of Wyndham,” said AAHOA Chairman

Bharat Patel. “To have one franchisor

Choice Hotels control so many economy

and limited service hotels will give our

members little opportunity to have a say

in whether the franchise mandates and

requirements are fair, and significantly limit

their options to find a different brand under

which they could successfully operate their

hotels.”

In February, Choice withdrew its support

for AAHOA over the association’s support

for franchising reform, including a proposed

bill in New Jersey’s Assembly Bill 1958,

which would make changes to the New

Jersey Franchise Practices Act that could

benefit hotel owners.

“This news of a potential merger has

sent a shock wave of high concern and even

fear through our AAHOA membership,”

said Laura Lee Blake, AAHOA president

and CEO. “We have seen in the past the

major impact that mergers and acquisitions

by the big hotel franchisor corporations

can have on our members as the hotelier

franchisees.”

Blake said AAHOA is calling on the

Federal Trade Commission to investigate

the proposed merger.

Choice seeks to acquire

Wyndham despite rejection

Wyndham’s board calls the proposal ‘unsolicited’ and ‘underwhelming’

Patrick Pacious, Choice Hotels International’s president and CEO,

left, and Geoﬀ Ballotti, Wyndham Hotels & Resorts' president and

CEO, speaking at their companies’ conferences. On Oct. 17, Choice

announced it has proposed to acquire Wyndham in an approximately

$9.8 billion transaction.

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