Almost a year after Choice Hotels International shook the budget hotel tree with its bid to acquire rival Wyndham Hotels & Resorts, on Monday it axed its attempt, abandoning its $8-billion bid for the company, after the expiration of its exchange offer to acquire all shares of the company.
Wyndham was against the acquisition attempt from the jump, standing by three premises why: insufficient valuation, unattractive consideration mix and asymmetrical regulatory risk.
In a press release issued by Choice, the Rockville, Md.-headquartered company said it was withdrawing its nomination of independent director candidates for election at Wyndham’s 2024 Annual Meeting of Stockholders. “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—particularly when taking into account the Wyndham board’s obvious continuing disinterest in a combination—that a path towards a transaction is available at this time. As such, Choice has decided not to extend the exchange offer and is withdrawing its slate.”
One of the biggest points of contention revolved around FTC approval of the merger, which some believed would be anti-competitive given the extraordinary dominance in economy and midscale hotels a merger would have created. After Choice went public with its bid in October, Stephen Holmes, chairman of Wyndham’s board of directors, said, “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.”
To this day, Choice remained steadfast that a deal could have gotten done. “The progress made on the regulatory front confirmed Choice’s belief that the combination is pro-competitive, and approval would have been achievable in a customary timeframe.”
In a contemporaneous, adjacent industry merger attempt, JetBlue Airways called off its $3.8-billion merger with Spirit Airlines after a after a federal judge in January blocked the acquisition citing violation of antitrust law.
Wyndham made public a letter to shareholders prior to Choice’s announcement that reiterated its stance against the proposed deal. Shortly later, after Choice’s announcement, it offered a statement of its own:
“The Wyndham Board is pleased that Choice has ended its hostile pursuit and proxy contest, following the expiration of its unsolicited exchange offer,” said Holmes. “We are confident in Wyndham’s standalone strategy and growth prospects under the leadership of our proven management team. The Board remains committed to acting in the best interests of our shareholders and driving superior long-term value creation.”
Added Geoff Ballotti, president and CEO of Wyndham Hotels & Resorts: “Wyndham is focused on moving ahead with the execution of our strategic plan, building on our success and generating meaningful value. We look forward to doing so without the unnecessary distraction of this situation and disruption to our business. We would like to thank our shareholders and franchisees for their continued support and our team members for their dedication and focus throughout this process.”
Choice said it now intends to continue focusing on its standalone strategy “to create significant long-term value for its stockholders and franchisees. Choice said its board approved its share buyback authorization to 5 million shares or around $6 million.
Choice’s stock was up 6% in early trading on the news. Wyndham’s was down 1%.
