Choice Hotels launches $10bn hostile bid for rival Wyndham

Unlock the Editor’s Digest for free

Choice Hotels International has launched a nearly $10bn hostile bid for rival Wyndham Hotels and Resorts, after six months of takeover talks to create one of the biggest US budget hotel operators collapsed.

The decision to go hostile came after Wyndham decided to walk away from late-stage deal talks in recent weeks after rejecting two offers from its rival, Choice said on Tuesday.

“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,” said Choice chief executive Patrick Pacious.

“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,” said Pacious.

Choice has offered Wyndham shareholders $90 a share, which includes $49.50 in cash and the remainder in stock, valuing the equity at $7.8bn. Choice would also take on Wyndham’s $2bn debt. The offer is 30 per cent above Wyndham’s share price on Monday after markets closed.

Maryland-based Choice Hotels has brands including Radisson, the Econo Lodge and Sleep Inn and has a market capitalisation of $6.1bn. New Jersey-based Wyndham is home to the La Quinta and Ramada brands and has a market capitalisation of about $5.7bn.

The potential tie-up would create one of the biggest budget hotel owners in the US, with significant operations overseas. Choice has 7,827 hotels in its portfolio worldwide, about four-fifths of which are in the US, while Wyndham has around 9,100 hotels, with 845,000 rooms. Both companies run a franchised model.

Choice’s latest offer is the third it has sent to Wyndham since they first held talks six months ago. In April, it proposed buying Wyndham for $80 a share, mainly in stock, and in September it increased its bid to $85 a share, while also increasing the cash portion of the offer.

Wyndham rejected both, although Choice claimed that the rival acknowledged the benefits of a combination that they believe would create annual synergies worth about $150mn.

Wyndham raised questions about the value of Choice’s stock and timing for regulatory approval, Choice said in its statement. The company added that the cash portion of its offer would be funded with a combination of cash on hand and issuing debt.

Moelis & Company and Wells Fargo are serving as financial advisers to Choice, alongside legal adviser Willkie Farr & Gallagher.

Read the full article here