ROCKVILLE, Maryland—Choice Hotels International, Inc. announced a proposal to acquire all the outstanding shares of Wyndham Hotels & Resorts, Inc. at a price of $90.00 per share, payable in a mix of cash and stock.
Under Choice’s proposal, the $90.00 per share to be received by Wyndham shareholders would consist of $49.50 in cash and 0.324 shares of Choice common stock for each Wyndham share they own. Choice’s proposal represents a 26 percent premium to Wyndham’s 30-day volume-weighted average closing price ending on October 16, 2023, an 11 percent premium to Wyndham’s 52-week high, and a 30 percent premium to Wyndham’s latest closing price. In addition, Choice’s proposal includes a cash or stock election mechanism, which would provide Wyndham shareholders with the ability 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. With the assumption of Wyndham’s net debt, the proposed transaction is valued at approximately $9.8 billion.
Choice is making its latest proposal public following Wyndham’s decision to disengage from further discussions with Choice, following nearly six months of dialogue.
Patrick Pacious, president and CEO of Choice Hotels, said, “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. For franchisees, the transaction would bring Choice’s proven franchisee success system to a broader set of owners, enabling them to benefit from Choice’s world-class reservation platform and proprietary technology to drive cost savings and greater investment returns. Additionally, the value-driven leisure and business traveler would benefit from the combined company’s rewards program, which would be on par with the top two global hotel rewards programs, enabling them to receive greater value and access to a broader selection of options across stay occasions and price points.”
“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. 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. Importantly, we remain convinced of both the many benefits of the combination and our ability to complete it,” concluded Pacious.
Stakeholder Benefits
The proposed transaction is expected to provide benefits for both companies’ stakeholders—franchisees, shareholders, associates, and guests—that could be significant in the current uncertain economic climate:
Lower Total Cost of Ownership and Increased Hotel Profitability for Franchisees
- Capitalizes on Choice’s franchisee system, dedicated to driving topline reservation delivery to hotel owners’ properties, while lowering the total cost of hotel operations.
- Nearly doubles the resources available to spend on marketing and driving direct bookings to franchisees’ hotels, lowering the cost of customer acquisition.
- Establishes an even larger rewards member base on par with two global programs in hospitality.
- Drives more business to franchisees through lower-cost direct booking channels, lower customer acquisition commissions and fees, and lower hotel operating costs and technology-driven labor efficiencies, while continuing to determine their own commercial and pricing strategy.
- Improves the value of franchisees’ real estate assets by enhancing applicable cap rates and cash flows resulting from affiliation with the proforma company.
- Reduces friction by offering guests a portfolio of brands across segments, no matter their stay occasions, within a single system.
- Promotes increased investment and innovation in technology systems, processes, and training at the hotel and corporate level, which drives returns for Choice franchisees.
- Creates an opportunity to replicate Choice’s recent acquisition of Radisson Hotel Group Americas. During the integration of the nearly 600 Radisson Americas hotels into the Choice platform, Radisson’s franchisees have benefited from increased guest traffic to direct and digital channels, improvement in conversion rates, and access to more corporate accounts, among other benefits.
Value Creation for Shareholders
- Represents a 26 percent premium to Wyndham’s 30-day volume-weighted average closing price ending on October 16, 2023, an 11 percent premium to the 52-week high, and a 30 percent premium to the latest closing price.
- Anticipates meaningful annual run-rate synergies, estimated at approximately $150 million, through the rationalization of operational redundancies, duplicate public company costs, and topline growth potential.
- Enables Wyndham shareholders to benefit from Choice’s EBITDA multiple on a go-forward basis and receive deferred tax treatment on their stock consideration.
- Creates additional capacity to further support Choice’s revenue-intense strategy, helping drive growth across its organic revenue levers.
- Generates predictable high free cash flow through an asset-light, fee-for-service model, providing resiliency through all economic cycles and enabling additional investments for future growth.
- Offers Wyndham two seats on the combined company’s board and Wyndham shareholders the opportunity to participate in the upside potential of the combined company.
- Cash/stock consideration mechanism enables Wyndham shareholders to choose between immediate upfront proceeds or value creation, subject to a customary proration mechanism.
More Lodging Options for Guests
- Creates a combined rewards program on par with two global programs in hospitality and will offer program benefits through partnerships and hotel redemption options.
- Builds a global network of brands and hotels that meets the needs of the traveler across geographies, stay occasions, and price points, supported by a reservation system that provides guests with a booking and shopping experience.
- Improves data analytics, enabling the combined company to personalize communications and tailor recommendations to best meet the needs of the up to 160 million combined rewards program members.
Opportunities and Stability for Associates
- Offers the ability to retain and attract talent.
- Provides more opportunities for advancement and career growth as part of a larger organization.
- Combines two cultures with a continued emphasis on associate development and growth.
Recent Engagement Overtures
Choice has been engaging with Wyndham for nearly six months.
In April 2023, Choice sent its initial letter to Wyndham regarding a potential transaction, proposing to acquire Wyndham for $80.00 per share, comprising 40 percent cash and 60 percent Choice stock. The proposal represented a 20 percent premium to the closing price of Wyndham common stock on April 27, 2023, and a 19 percent premium over Wyndham’s 30-day volume-weighted average share price as of such date. Wyndham rejected the proposal and refused to engage in further discussions.
In the days and weeks thereafter, Choice continued to attempt engagement with Wyndham, increasing its proposal to $85.00 per share, comprising 55 percent cash and 45 percent Choice stock, explaining that further discussions could clarify Wyndham’s hesitation to proceed with negotiations. The companies’ respective Board Chairs and CEOs then met in person, and following that meeting, Choice improved its proposal yet again. Choice made its best and final offer which represented an increase of the per-share consideration to $90.00, comprising 55 percent cash and 45 percent Choice stock.
In September 2023, the Choice and Wyndham Board Chairs continued engagement, along with each of their respective financial and legal advisors. 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 the timing for obtaining regulatory approvals. In response, Choice proposed to enter into a one-way, short-term non-disclosure agreement to facilitate Choice providing information that would address Wyndham’s concerns (a draft of which was subsequently sent to Wyndham) and made its external counsel available for several discussions. However, during a follow-up call between the Chair of each company’s Board and their respective advisors, Wyndham made clear their unwillingness to proceed with further discussions.
