Choice Hotels is persistently attempting to acquire rival budget-hotel chain Wyndham Hotels & Resorts. Despite failing to convince management previously, Choice is now seeking direct appeal with shareholders.
A History of Rejection and Negotiations
In October, Wyndham’s board unanimously rejected a proposal that would have valued the firm at nearly $8 billion. Following six months of negotiations, discussions were abruptly ceased after the proposal.
A Hostile Offer
Choice Hotels is now making the same hostile offer that was previously presented to Wyndham’s board. This offer entails $90 a share for Wyndham holders, a combination of cash and Choice stock.
Seeking a Mutually Agreeable Transaction
Choice CEO Patrick Pacious expressed disappointment in the Wyndham Board’s refusal to explore a transaction. They stated, “While we would have preferred to come to a negotiated agreement, the Wyndham Board’s refusal… has left us with no choice but to take our proposal directly to Wyndham’s shareholders.” Pacious further emphasized their goal of reaching a mutually agreeable transaction.
Building the Position
In addition to the bid, Choice already holds roughly $110 million in Wyndham stock. The company has begun the regulatory approval process and is actively considering candidates for nomination to Wyndham’s board.
Dealing with Debt Concerns
Wyndham argued during negotiations that a merger would result in an excessive debt burden for the combined group. However, Choice countered this by highlighting how a tie-up would enhance their competitive position against Marriott and Hilton.
Market Response and Outlook
Wyndham stock saw a 1.8% rise ahead of Tuesday’s opening.