Choice Abandons Hostile Merger Bid for Wyndham Hotels
Choice Hotels on Monday dropped its $8 billion hostile takeover bid for Wyndham Hotels & Resorts it launched last October.
Choice, the operator of Comfort and other brands, had given Wyndham stockholders until last Friday to tender their shares, but not enough participated to give Choice Hotels hope of success.
Choice Hotels also withdrew its nomination of independent director candidates for Wyndham’s board.
Why it matters
The long-running saga has distracted the managers of the two companies, which can now pursue other options. Wyndham said last month it had underperformed its potential, blaming the hostile takeover attempt for leading to distracting regulatory oversight, including $15 million in costs of addressing federal antitrust watchdog questions.
Other players may be benefiting from the fracas. Analysts at investment bank Truist met with Sonesta, a competitor to Choice and Wyndham who said the merger battle has helped them win owners to its system.
Choice Hotels may go about other acquisition moves of more minor players, perhaps internationally.
Why Wyndham resisted
Wyndham said on Monday it had rejected Choice’s proposal for several reasons including:
“The asymmetrical risk to Wyndham shareholders given the uncertainty around antitrust approval (if any).”
“The undervaluation of Wyndham’s superior, standalone growth prospects.”
“The value of Choice shares relative to its growth prospects.”
“The elevated levels of leverage that this deal would require.”
What’s “an exchange offer?”
Choice said it had decided not to accept any shares for reasons “including the refusal of the Wyndham board to engage in constructive discussions on terms.” All tendered shares of Wyndham stock will return to stockholders who tendered them.
Choice Hotels pursued a hostile tender offer. It’s offering shareholders its own stock and cash to the shareholders of Wyndham in exchange for their shares.
Choice Hotels set a ratio of how many new shares or securities would be exchanged for each existing target company share, claiming its proposed offer price was a 30% premium to Wyndham’s closing share price of $69.10 before Choice first publicized its offer.
If a majority of the shareholders had tendered their shares, Choice would have pushed its slate of replacement board members and moved to control the company.
Choice stock hit new 52-week lows in early March. Its price was up in pre-market trading.
Wyndham’s stock was down in pre-market trading.
CORRECTION: Article updated for a typo in the size of Wyndham’s expenses in answering federal regulator’s questions: $15 million not $15.
More on the Choice/Wyndham Saga
Choice Hotels Buys More Than $110 Million in Wyndham Shares
Wyndham Results Hurt By Cost and ‘Noise’ of Choice Hotels’ Hostile Bid
Choice Hotels Offers to Buy Wyndham for $7.8 Billion, Wyndham Rejects Bid
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