New Jersey, USA- Wyndham Hotels & Resorts (NYSE:
WH
) (“Wyndham” or the “Company”), the world’s largest hotel franchise company with approximately 9,100 hotels in more than 95 countries, announced that its board of directors unanimously rejected a highly conditional and unsolicited cash and stock proposal by Choice Hotels InternationalInc. (NYSE:
CHH
) (“Choice”) to acquire all outstanding shares of Wyndham.
Wyndham’s board of directors, along with its financial and legal advisors, closely reviewed Choice’s latest proposal with a face value of
$90
per share, made up of 45 percent stock and 55 percent cash, and determined that it is not in the best interest of shareholders. to accept the proposal.
In rejecting Choice’s proposal, the Wyndham Board of Directors determined that:
- The proposed transaction involves significant business and execution risks, including an extended regulatory timeline and uncertainty regarding the outcome, potential franchisee turnover, and excessive levels of leverage in the pro forma combined company.
- The mix of considerations includes a significant component of Choice stock, which the Board believes is fully valued relative to Choice’s growth prospects, especially in comparison to Wyndham.
- The offer is opportunistic and underestimates Wyndham’s future growth potential.
“Choice’s offer is disappointing, highly conditional and subject to significant commercial, regulatory and execution risks. “Choice has been unwilling or unable to address our concerns,” he said.
Stephen P. Holmes
, chairman of the Wyndham board of directors. “While our Board would support a value-maximizing transaction, given the substantial and unmitigated implied risks and potential for value destruction presented by the proposed transaction, our Board determined that 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 that the proposed transaction would likely take more than a year to even determine whether, and under what terms, it could pass antitrust review, and Choice was unable to address these long-term risks. We are disappointed that Choice’s description of our commitment falsely suggests that we were fundamentally aligned and fails to describe the real reasons why we have consistently questioned the merits of this combination: Choice’s inability and unwillingness to address our concerns. significant concerns about regulatory and enforcement risk and our deep concerns about the value of its shares.
The Wyndham Board believes that during the long period between the announcement and the closing or termination of the transaction, Wyndham shareholders would be exposed to the threat of significant long-term deterioration in Wyndham’s brand value, franchisee turnover and poor execution of the integration into the combined company in which Wyndham shareholders would have a significant interest.
Additionally, the significant amount of debt required to fund the cash portion of the deal would result in the combined company’s net leverage exceeding 6 times adjusted EBITDA. This above-market leverage would increase execution risk and restrict the flexibility of the combined company’s balance sheet, putting downward pressure on future growth potential, share price and valuation multiples. As a result, value creation from cost synergies may not be fully realized.
Wyndham’s board also has important questions and concerns about the value of Choice’s stock. Choice’s latest offer includes a 45% stake in Choice shares, which Wyndham’s board believes is fully valued. Industry experts unequivocally share the view that Choice is fully valued, with more than three-quarters of research analysts holding Choice with a Sell or Hold rating.
Wyndham’s board sees Choice’s offer as an attempt to mask its anemic organic growth and believes Wyndham shareholders are better positioned by owning Wyndham shares, which have a significant upside relative to Choice’s fully valued shares. .