Choice Hotels Launches Hostile Bid For Wyndham
Quality Inn owner plans to nominate a slate of directors to Wyndham’s board
Choice Hotels CHH 1.06%increase; green up pointing triangle is launching a hostile takeover offer for Wyndham Hotels & Resorts WH 1.59%increase; green up pointing triangle, after repeatedly being rebuffed in its effort to strike a friendly deal.
Choice on Tuesday will publicly unveil a so-called exchange offer for Wyndham stock, according to people familiar with the matter, appealing directly to its rival’s shareholders.
The offer is unchanged from its previous proposal to Wyndham itself of $49.50 in cash and 0.324 Choice share for each Wyndham share. That was worth a total of $90 a share, or $7.8 billion, on Oct. 16, the day before Choice first publicized the offer. Choice is prepared to potentially raise the offer after doing due diligence, the people said.
To further ratchet up the pressure, Choice intends to nominate a slate of directors to be voted on at Wyndham’s 2024 annual shareholder meeting, and is in the process of interviewing candidates. The window for nominations runs from Jan. 10 to Feb. 9.
Choice has previously said it intended to pursue all paths available to strike a deal with Wyndham. In the most recent salvo, it sent a letter to Wyndham last month seeking to restart negotiations and strike a deal before the end of the year, which Wyndham rejected and called a “step backwards” in their discussions.
Choice has been building a stake in Wyndham and currently holds roughly 1.5 million shares of its common stock, worth over $110 million.
Choice plans to file a so-called Hart-Scott-Rodino notification to begin the regulatory-review process required for such a combination. It has already met with officials from the Federal Trade Commission to discuss any regulatory concerns and thinks a deal can be completed within a year. Choice plans to argue that hotel franchisees have the power to set their own prices, so a deal with Wyndham shouldn’t result in higher prices for consumers.
Wyndham has argued a deal would saddle the combined company with too much debt and leave employees and franchisees in limbo as the regulatory-approval process runs its course.
Choice and Wyndham both mostly cater to travelers looking for midtier options. Choice, whose brands include Radisson, Quality Inn and Econo Lodge, has said it wants to expand in the so-called upper-midscale and upscale segments, and combining with Wyndham would help with that effort. Wyndham’s brands include Travelodge, Days Inn and La Quinta.
A merger would also position the combined company to better compete against larger lodging rivals Marriott and Hilton, Choice believes.
The exchange offer features a so-called regulatory ticking fee of 45 cents per Wyndham share a month, equivalent to $38 million, which would accrue daily after the one-year anniversary of the date a majority of Wyndham’s shares are tendered into the offer.
The companies had been in talks for months before they broke off in September. Choice initially offered Wyndham $80 a share in April, in cash and stock. The Wall Street Journal first reported in May that Choice sought a combination with Wyndham and that it could eventually take an offer directly to shareholders.