After Choice reminded Wyndham shareholder to tender their
shares by Friday, analysts published mixed reports and signals about the state
of the hostile takeover bid.
After Choice Hotels International put out a statement on Tuesday urging
Wyndham Hotels & Resorts shareholders to tender their shares ahead of Friday’s
exchange offer deadline, R.W. Baird analyst Michael Bellisario published an
interesting note suggesting that maybe it’s time for Choice to walk away from
its attempted hostile takeover of its rival.
He said that based on Choices ~$110 share price, it could now
make more sense to pursue its standalone strategy.
Choice shares were just at a 52-week low yesterday but are now up 5% today on Choice indicating that it could walk away. That’s a good indicator of how investors are positioned and where sentiment is toward the deal.
Michael Bellisario
“The stock price is the real-time indicator,” he further
explained to Hotel Investment Today. “Right or wrong, the market is voting
every day. Choice shares were just at a 52-week low yesterday but are now up 5%
today on Choice indicating that it could walk away. That’s a good indicator of
how investors are positioned and where sentiment is toward the deal.”
However, Truist Securities analyst C. Patrick Scholes
suggested Choice’s stock was up because of management’s confidence in getting
the Wyndham deal done at an unchanged offer (around $90 per share) and not
having the FTC reject the deal.
Hotel Investment Today also reached out to Choice Hotels for a response to the R.W. Baird commentary and offered this statement: “Choice continues to believe that a combination with Wyndham offers a
compelling value to all stakeholders. However, the Wyndham board has not
provided any feedback on specific transaction terms. Now is the time for
Wyndham stockholders to tender their shares into the exchange offer and send a
clear message to the Wyndham board to constructively engage with Choice to
reach as consensual agreement. Depending on participation in the exchange
offer, Choice intends to either extend or terminate the exchange offer and will
evaluate next steps related to its nomination of a slate of independent
directors for election to the board of directors of Wyndham.”
Next moves
Scholes added that the final result of the tendered shares
by Friday evening will impact Choice’s next move. “Choice is aware of who has
tendered their shares but is not commenting publicly as to the results so far,”
Scholes said. “At this time, we do not expect Choice to give up on the merger,
especially given the commentary and tonality from management on our call today,
including their description of the interactions with the FTC and seeming ‘normality’
of the second request proceedings.”
At this time, we do not expect Choice to give up on the merger, especially given the commentary and tonality from management on our call today, including their description of the interactions with the FTC and seeming ‘normality’ of the second request proceedings.
C. Patrick Scholes
Bellisario, “reading between the lines,” sees it
differently. He said Baird senses that Choice is “signaling it could take its
foot off the M&A gas, which would be a positive for Choice shares and
investor sentiment.”
Bellisario also questioned whether Choice is getting
sufficient Wyndham shareholder buy-in based on the current proposal. “Extending
the offer until the Wyndham shareholder meeting date makes logical sense but
likely just pushes out the inevitable (of not getting enough Wyndham
shareholder buy-in), in our opinion,” he said.
In Choice’s statement, it continued to call out Wyndham for
not cooperating enough to even consider enhancing its offer. With Wyndham
refusing to engage, Bellisario opined, “we’re left at a standstill until FTC
clarity emerges.”
Considering how the JetBlue-Spirit and Kroger-Albertsons
deals met their demise as a result of FTC concerns, he said the industry is
left to wonder whether the Choice-Wyndham deal will meet a similar fate.
“Separately, and not directly referenced by Choice in its
press release, are the risks to the timeline for and likelihood of FTC
approval, especially following the high-profile M&A deals that recently hit
regulatory roadblocks,” Bellisario said.