Wyndham rejects ‘underwhelming, highly conditional’ proposal from Choice Hotels

Wyndham Hotels & Resorts (WH) announced that its board of directors “unanimously rejected a highly conditional, unsolicited stock-and-cash proposal” by Choice Hotels International (CHH) to acquire all outstanding shares of Wyndham. Wyndham’s board of directors, together with its financial and legal advisors, closely reviewed Choice’s latest proposal with a nominal value of $90 per share, comprised of 45% in stock and 55% in cash and “determined that it is not in the best interest of shareholders to accept the proposal,” the company announced. “Wyndham’s Board believes that during the long period between announcement and closing or termination of the transaction, Wyndham shareholders would be exposed to the threat of significant long-term deterioration of Wyndham’s brand equity, franchisee churn, and impaired integration execution at the combined company in which Wyndham shareholders would have significant interest. In addition, the significant amount of debt required to fund the cash portion of the deal would result in the combined company’s net leverage being over 6x adjusted EBITDA. This above-market leverage would increase execution risk and restrict the balance sheet flexibility of the combined company, putting downward pressure on future growth potential, share price and valuation multiples. As a result, the value creation from cost synergies may not be fully realized,” the company 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-maximizing 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 advisors 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. We are disappointed that Choice’s description of our engagement disingenuously suggests that we were in alignment on core terms and omits to describe the true reasons we have consistently questioned the merits of this combination – Choice’s inability and unwillingness to address our significant concerns about regulatory and execution risk and our deep concerns about the value of their stock,” added Stephen Holmes, Chairman of the Wyndham board of directors.