Rival discloses ownership position of more than $110 Million
of Wyndham stock; prepares to nominate candidates to Wyndham board.
NATIONAL REPORT - Choice Hotels International became even more aggressive with
its bid to acquire Wyndham Hotels & Resorts on Tuesday by commencing an
exchange offer to acquire all outstanding Wyndham shares, place more
members on the Wyndham board and present its proposal directly to Wyndham
shareholders.
The exchange offer, which continues to value Wyndham at about $8
billion ($90 per share), gives Wyndham shareholders the option for an all-cash payment, all
stock or a combination of the two.
Choice also announced that it currently holds approximately
1.5 million shares of Wyndham common stock, valued in excess of $110
million and is filing the Hart-Scott-Rodino notification to begin
the required regulatory review.
The offer proposed by Choice appears unchanged from the terms outlined in a letter to Wyndham dated November 14, 2023 and is currently valued at approximately $86 per share.
Wyndham Hotels & Resorts
However, Wyndham has stated that Choice only held a minority
1.7% of its stock and was not allowed to acquire more without antitrust
approval.
In response to Choice’s latest maneuver, Wyndham confirmed receipt of the unsolicited exchanged offer, adding, “the offer proposed by Choice appears
unchanged from the terms outlined in a letter to Wyndham dated November 14,
2023 and is currently valued at approximately $86 per share.”
It added that it will review and evaluate the offer to
determine the course of action that it believes is in the best interests of
Wyndham and its shareholders. “However, the offer looks to be unchanged from
Choice's previous highly conditional offer the Board reviewed and rejected,
which failed to address the serious concerns repeatedly expressed by Wyndham,”
its statement read.
Wyndham continues to express concern about the following:
- The asymmetrical risk to Wyndham shareholders given the
uncertainty around antitrust approval (if any) and the estimated 24-month
timeline previously cited by Choice;
- The undervaluation of Wyndham's superior, standalone growth
prospects; and
- The value of Choice shares relative to its growth prospects
and further compromised by elevated levels of leverage that this deal would
require.
In addition to the Wyndham shares they previously
disclosed, Choice today announced ownership of less than 1.7% of Wyndham common
stock and conceded they are restricted from further purchases without antitrust
approval.
Wyndham stated that its Board intends to advise shareholders
of its recommendation regarding the offer within 10 business days and urged
shareholders not to take any action until then.
Wyndham chose to publicly reject our last proposal without any engagement even after we addressed their concerns, including adding significant regulatory protections for their shareholders.
Patrick Pacious
Choice Hotels President and CEO Patrick Pacious said on
Tuesday that a lack of action from Wyndham left Choice with no other option
that to take its proposal directly to Wyndham’s shareholders. “Wyndham chose to
publicly reject our last proposal without any engagement even after we
addressed their concerns, including adding significant regulatory protections
for their shareholders,” he said.
Pacious added that it remains Choice’s goal to reach a mutually
agreeable transaction, and there is potential for additional value to be
unlocked if Wyndham were to return to the negotiating table and provide due
diligence. “We look forward to meeting with Wyndham's shareholders in the days
and weeks ahead and to continuing the regulatory approval process we're
starting this week," Pacious concluded.
Terms of exchange offer
The exchange offer maintains the previously proposed offer
to Wyndham, comprised of $49.50 in cash and 0.324 shares of Choice
common stock per Wyndham share, representing a value of $40.50 based
on Choice’s trading price as of October 16, 2023, the day prior to Choice’s
first public offer (the "Pre-Release Date"). As of the Pre-Release
Date, the proposed offer price equates to a 30% premium to Wyndham’s closing
share price of $69.10, and reflects a 14.9x multiple of Wyndham's
consensus 2023 adjusted EBITDA estimate, a forward multiple Wyndham has never
achieved, absent COVID disruptions.
The exchange offer provides Wyndham shareholders the
opportunity to elect to receive the consideration in all cash, all shares or a
combination of cash and shares, subject to a customary proration mechanism. In
addition, the exchange offer features a regulatory ticking fee of $0.45 per
Wyndham share per month, equivalent to $38 million per month,
accruing daily after the one-year anniversary of the date a majority of Wyndham’s
shares are tendered into the offer. This additional consideration, which has
been included so that Wyndham shareholders can receive benefits similar to what
Choice previously offered in its November 14, 2023 proposal in the
unlikely event the transaction were to take longer than 12 months to close,
would be payable in cash or stock, at Choice's election, upon Choice’s
acceptance and exchange of the Wyndham shares tendered into the offer.
The exchange offer and withdrawal rights are scheduled to
expire at 5 p.m. New York City time on Friday March 8, 2024,
unless the offer is extended or terminated. The exchange offer is subject to
conditions, including the receipt of all required regulatory approvals. In the
exchange offer, Choice is committing to take all actions required by regulators
in connection with the approval of the transaction so long as such actions
would not have a material adverse effect on the combined company.
Choice’s updated offer on November 14 included additional
protections for Wyndham shareholders to provide certainty, as Wyndham publicly
stated they desired, including:
- A reverse termination fee of $435 million, which
represents approximately 6.0% of the total equity purchase price, payable in
the event that the transaction did not close due to the failure to receive the
required regulatory approvals;
- A regulatory ticking fee of 0.5% of the total equity
purchase price per month, accruing daily after the one-year anniversary of the
signing of definitive agreements;
- A mutual non-disclosure agreement to allow the parties to
conduct confirmatory due diligence; and
- A commitment to taking all actions required by regulators in
connection with the approval of the transaction so long as such actions would
not have a material adverse effect on the combined company.
Wyndham publicly rejected the proposed terms on November
21.
While not applicable to the exchange offer, in the context
of a negotiated transaction, Choice said it remains willing to offer Wyndham
shareholders a reverse termination fee that is consistent with the terms in
its November 14 proposal and two seats on the combined company’s
board. Additionally, Choice said it is willing to enter into a mutual
non-disclosure agreement to conduct confirmatory due diligence that could
potentially unlock additional value for Wyndham shareholders.
Path forward, next steps
Choice stated that it is starting the clock on the
regulatory approval process and is filing notification and report forms under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with the U.S. Federal
Trade Commission (FTC). Choice added that it has already met with the FTC on a
voluntary basis to discuss the pro-competitive nature of the transaction and
looks forward to continuing to work closely with the FTC. Choice said it is
committed to completing the transaction within one year.