Wyndham Hotels & Resorts has revealed that its board of directors has unanimously turned down an unsolicited stock-and-cash proposal from Choice Hotels International to buy all its outstanding shares.
Choice Hotels International revealed on 17 October 2023 a proposal to purchase all outstanding shares of Wyndham at a rate of $90 per share, which consists of $49.50 in cash and 0.324 shares of Choice common stock for every share of Wyndham.
Wyndham's board of directors, in consultation with financial and legal experts, assessed Choice's proposal and concluded that it was not in their best interest to accept the offer.
Deutsche Bank Securities and PJT Partners are serving as financial advisers while Kirkland & Ellis LLP is acting as a legal adviser for Wyndham.
The reasons for turning down the proposal include concerns over business and execution risks, including an extended regulatory timeline, potential franchisee churn and undervaluing the growth prospects of Wyndham.
Furthermore, a significant part of the consideration mix features Choice stock, which Wyndham’s board of directors believes is “fully valued relative to Choice's growth prospects, especially when compared to Wyndham”.
Wyndham chairman of the board of directors Stephen P Holmes said: “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.
“While our Board would support a value-maximising 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.
“We have engaged with Choice and its advisers on multiple occasions to explore these risks. However, 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.”
Wyndham’s board is further concerned about the long period between the proposal and the deal's completion, resulting in possible brand deterioration and integration difficulties.
Other reasons for the refusal include the high debt required to fund the cash part of the deal, which would lead to the combined entity’s net leverage being over 6x adjusted EBITDA.
In April 2023, Choice made an unsolicited proposal to acquire Wyndham at $80 per share, with 40% in cash and the rest in Choice stock. However, this proposal was deemed insufficient by Wyndham’s board. Since then, Choice has made several proposals to acquire Wyndham.
Currently, Wyndham has 9,100 hotels in over 95 countries across six continents.
