It's over! Choice walks away from Wyndham deal

NATIONAL REPORT – Wyndham Hotels & Resorts has successfully fought off a hostile takeover attempt by Choice Hotels International as the pursuer on Monday announced it was withdrawing its director candidates for election and its bid for the takeover after Friday’s deadline passed for shareholders to tender their shares.

Choice stated that 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.

The path to and timing of a deal was not clear and the opportunity cost of alternatives had increased. The hostile takeover attempt of Wyndham has been a distraction for investors, and valuation is too discounted and investor sentiment is too negative.

Michael Bellisario

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R.W. Baird analyst Michael Bellisario wrote, “The path to and timing of a deal was not clear and the opportunity cost of alternatives had increased. The hostile takeover attempt of Wyndham has been a distraction for investors, and valuation is too discounted and investor sentiment is too negative.”

He added that Choice could come back for another bid saying a much-improved stock price (both absolutely and relatively to Wyndham) and a more favorable regulatory backdrop would be necessary.

Wyndham released a statement later on Monday morning with Chairman Stephen Holmes saying, “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.”

Wyndham President and CEO Geoff Ballotti added, “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 cited a number of reasons for its decision, including Wyndham’s refusal to engage in constructive discussions on terms and the fact that a number of the conditions to the offer, such as the minimum tender condition, remained unsatisfied as of the expiration date. Choice has instructed the exchange agent for the exchange offer to promptly return all tendered shares of Wyndham stock to the tendering stockholders.

In a statement, Choice added, “Since beginning this process in April 2023, Choice has attempted to engage in good-faith negotiations with Wyndham through numerous different avenues, including increasing the proposed offer multiple times and expressing an openness to further enhancing the offer with due diligence, offering a one-way NDA to share its confidential information with Wyndham, and offering above-market regulatory protections. Given Wyndham's refusal to constructively and substantively engage on terms, Choice took the extraordinary step of launching the exchange offer to initiate the regulatory review process and engage with Wyndham 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. Choice intends to continue focusing on its standalone strategy, which the Company is confident will create significant long-term value for its stockholders and franchisees.”

Choice also said the progress made on the regulatory front confirmed its belief that the combination is pro-competitive, and approval would have been achievable in a customary timeframe.

Choice added that it will focus on its standalone strategy and is increasing its share buyback authorization to ~6.8 million shares (~13.6% of the outstanding share count).