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Choice 's Attempt to Takeover Wyndham

Choice Hotels International (CHH.N) initiated a hostile bid for Wyndham Hotels & Resorts (WH.N)

Choice Hotels Launches Hostile Bid for Wyndham, Board Battle Looms

Choice Hotels International (CHH.N) initiated a hostile bid for Wyndham Hotels & Resorts (WH.N), setting the stage for a potential board battle in its pursuit to bring Wyndham to the negotiating table.

In October, Choice publicly disclosed its cash-and-stock offer for Wyndham, initially valued at around $8 billion, aiming to merge two major U.S. budget hotel operators. The current value of the offer stands at approximately $7.2 billion, reflecting a decline in Choice’s stock.

Choice Hotels CEO Patrick Pacious expressed optimism, stating, “There is potential for additional value to be unlocked if Wyndham were to return to the negotiating table and provide due diligence.”

In response, Wyndham confirmed that its board would evaluate the offer. However, it reiterated concerns, noting that the offer undervalues its business and poses regulatory risks. Wyndham also highlighted potential challenges, including a combined company’s high debt level and the slower growth prospects of Choice’s business.

Barclays analyst Brandt Montour commented, “Choice taking this next step…sends an incrementally stronger message, but doesn’t materially alter the likelihood of a transaction.”

As Choice announced its ownership of less than 1.7% of Wyndham stock, Wyndham’s shares rose 1.2% to $80.13 in morning trade. A previous Reuters report in November had hinted at Choice’s intention to challenge Wyndham’s board.

The bid comes amid challenges in domestic travel due to inflation, potentially increasing demand for budget hotels among cost-conscious travelers.

Wyndham shareholders are eligible for a $38 million per month regulatory ticking fee if the deal remains incomplete after one year from the signing of definitive agreements, according to Choice.

The exchange offer and withdrawal rights are set to expire at 5:00 p.m. ET on March 8, 2024, unless extended or terminated. Choice is actively identifying director candidates for nomination to Wyndham’s board at the 2024 annual meeting and will file documents with the Federal Trade Commission to initiate the regulatory review process.