Choice Hotels International (CHH) has withdrawn its USD 7.8 billion acquisition offer for competitor Wyndham Hotels & Resorts (WH), citing the board of Wyndham’s unwillingness to participate in a cooperative manner. Beginning a year ago as an offer, the purchase attempt evolved into a takeover attempt in December. With a 5 million share repurchase program, Choice will now concentrate on its activities and increase its worth to around USD 632 million. Choice sees no feasible way to complete the deal, despite some backing from shareholders.
Choice announced the expiration of its exchange offer to purchase Wyndham’s shares and the withdrawal of its director candidate nominations for the Wyndham board. In April of last year, Choice made its initial contact with Wyndham, and in October, it revealed its offer of cash and stock. The offer was valued at $89 per share, or around $7.2 billion, based on the closing share prices of the firms on Friday.
With the announcement of an exchange offer for Wyndham’s stock in December, Choice made a direct plea to Wyndham’s shareholders in an attempt to end the standoff over the merger. According to Reuters, Choice also proposed a group of directors to take the place of Wyndham’s current eight-person board. Wyndham has consistently rejected Choice’s offer, citing it as being low-cost and perhaps antitrust-related. The Parsippany, New Jersey-based Wyndham also expressed reservations about Choice’s economic downturn and the merged company’s excessive debt load.
Choice game a statement,
“While the support from Wyndham stockholders tendering into the exchange offer was significant considering the number of investors structurally prevented from participating at this stage, it was not sufficient for Choice to conclude … that a path towards a transaction is available at this time.”
Choice/Wyndham Merger Proposal Falls Through: Implications and Market Response
A merger of Choice and Wyndham would have produced the largest budget hotel chain in the United States, rivaling with upmarket chains like Hilton Worldwide and Marriott International which have been pushing hard to go into the lower end of the market recently. The upper-midscale and upmarket Choice hotel chain, which includes brands including Radisson, Country Inn & Suites, and Cambria Hotels, is located in Rockville, Maryland, and manages over 7,500 hotels throughout 46 countries. With over 9,100 hotel franchises throughout more than 95 countries, Wyndham is the parent company of low-cost brands like Travelodge, Ramada, Days Inn, and Microtel.
According to those acquainted with the situation, less than 20% of Wyndham’s shareholders approved Choice’s swap offer. Choice said that its board has increased the company’s share buyback authorization by five million shares, or around $600 million, and that it will now concentrate on its independent strategy. In afternoon trading, Choice’s shares increased by over 4%, while Wyndham’s gained by over 1%.
Wyndham Chairman Holmes, Stephen stated,
“We are confident in Wyndham’s standalone strategy and growth prospects under the leadership of our proven management team.”
Analyst at Truist Securities, Patrick Scholes wrote,
“We do not see it completely impossible that CHH could come back in with another offer should WH’s shares languish at these levels for another year,”
