Choice Hotels' Hostile Bid: Battle for Wyndham

MAR WH CHH

Choice Hotels International is pressing forward with an $8 billion hostile bid for Wyndham Hotels & Resorts by nominating a new slate of directors. This move gives Wyndham shareholders the opportunity to exert pressure on the company to engage in negotiations with Choice. By doing so, Choice is striving to sway Wyndham shareholders and advocate for the potential benefits of the merger.

The nominated slate of directors put forward by Choice includes industry veterans and experienced professionals. This signals Choice’s commitment to ensuring that the interests of Wyndham shareholders are represented. The intention behind this bold move is to create a platform for meaningful discussions between the two companies and to demonstrate the potential value that could be unlocked through a combination of their operations.

In response to Wyndham’s repeated rejection of the bid, citing reasons such as low-premium, potential antitrust risk, and concerns about debt levels and Choice’s business slowdown, Choice is attempting to demonstrate its confidence in securing antitrust clearance for the deal. This determination is evident in the fact that Choice has made multiple offers to Wyndham, with the latest bid being a cash-and-stock offer currently worth about $87 per share, representing a 26% premium to Wyndham’s closing share price on Oct. 16.

Moreover, the potential deal between the two companies has attracted scrutiny from four state attorneys general, and some upset franchisees could flee if the deal were to go through. The confrontation between the two companies is likely to continue as they pursue their respective strategies, making this a significant and evolving development in the hotel industry.

The Battle for Wyndham’s Board

Choice Hotels International has nominated a slate of directors to replace the eight-member board of Wyndham Hotels & Resorts. The slate includes industry veterans such as Jay Shah, Susan Schnabel, James Nelson, Fiona Dias, and others, indicating a strategic move by Choice to bring in experienced professionals who can advocate for the potential benefits of the merger.

Wyndham has raised concerns about the combined company carrying too much debt and Choice’s business slowdown. However, Choice is confident about securing antitrust clearance for the deal, arguing that the two companies together account for only 10% of U.S. room revenue. This confidence is further underscored by the fact that Choice has offered to pay Wyndham a break-up fee of $435 million were regulators to shoot down the deal, as well as a ticking fee.

The potential deal has attracted scrutiny from four state attorneys general and some upset franchisees who could flee if the deal were to go through. This underlines the complexities and challenges involved in the proposed merger, especially in terms of regulatory hurdles and the impact on various stakeholders in the hospitality industry.

Moreover, the move by Choice to nominate a new slate of directors for Wyndham’s board is an indication of the company’s determination to pursue the acquisition and its willingness to engage in a battle for control. This sets the stage for a potentially protracted and contentious process as both companies strive to assert their positions and influence the outcome.

Choice’s Confidence and Wyndham’s Concerns

Choice Hotels International has made multiple offers to Wyndham, with the latest bid being a cash-and-stock offer currently worth about $87 per share, representing a 26% premium to Wyndham’s closing share price on Oct. 16. This reflects Choice’s determination to pursue the acquisition and its confidence in the potential benefits that could be realized through the merger.

Wyndham, on the other hand, has repeatedly rebuffed the bid, citing concerns about antitrust risk, potential debt levels, and a slowdown in Choice’s business. These concerns highlight the complexities and challenges associated with the proposed deal, as well as the need for both companies to address and alleviate these concerns in order to move forward with the acquisition.

The potential deal between the two companies has attracted scrutiny from four state attorneys general, indicating the regulatory hurdles that need to be overcome for the acquisition to materialize. Moreover, the concerns raised by Wyndham underscore the need for both companies to engage in meaningful discussions and address the various issues in order to pave the way for a successful merger.

Despite the challenges and concerns, Choice remains confident about securing antitrust clearance for the deal. This confidence is evidenced by the company’s willingness to pay a break-up fee of $435 million and a ticking fee to Wyndham, indicating its commitment to seeing the acquisition through and addressing any potential obstacles that may arise.

Conclusion

The confrontation between Choice Hotels International and Wyndham Hotels & Resorts is a significant development in the hospitality industry, as it represents a bold attempt by Choice to acquire Wyndham through a hostile bid. Choice’s nomination of a new slate of directors and its confidence in securing antitrust clearance reflect the company’s determination to pursue the acquisition and unlock potential value for both parties.

On the other hand, Wyndham’s concerns about antitrust risk, potential debt levels, and a slowdown in Choice’s business highlight the complexities and challenges associated with the proposed deal. The battle for control and the need for both companies to address these concerns and engage in meaningful discussions further underscore the contentious nature of the acquisition process.

As both companies continue to pursue their respective strategies, it is clear that the confrontation between Choice Hotels International and Wyndham Hotels & Resorts is likely to continue, making this a development that will be closely watched within the hotel industry and beyond.

The information provided in this article is for general informational purposes only and should not be considered as financial advice.