Offer deemed inadequate and highly conditional; Wyndham
continues to cite FTC concerns and calls out Choice for inaccurate statements.
Placing a big lump of coal in Choice Hotels stocking, Wyndham Hotels
& Resorts stated on Monday that its board has unanimously recommended shareholders
reject Choice Hotels “inadequate and highly conditional Exchange Offer.” It
said Choice ignores significant regulatory and business risks and is misleading
Wyndham shareholders and stakeholders with inconsistent and inaccurate
statements.
Wyndham also launched StayWyndham.com, featuring a new
presentation detailing the antitrust risks related to the Choice offer.
Choice on Tuesday launched a hostile bid for Wyndham with an
Exchange Offer that continues to value Wyndham at about $8 billion ($90 per
share), giving 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.
Choice has, once again, failed to address the major value gap and risks of their offer – which remains virtually unchanged from the terms outlined in their previous unsolicited proposal.
Stephen Holmes
The latest salvo by Wyndham comes after a Thursday Asian American
Hotel Owners Association (AAHOA) survey of 1,000 members revealed about 80% of
Wyndham franchisee respondents said a deal between Choice and Wyndham would
hurt their business and about 60% said given the option they would terminate
their contract if the merger went through.
Wyndham also stated that the reception from franchisees has
been extremely negative, citing AAHOA commentary and adding that the Board is concerned
that the announcement of a transaction could result in increased franchisee
churn and reduced new development activity.
“Choice has, once again, failed to address the major value
gap and risks of their offer – which remains virtually unchanged from the terms
outlined in their previous unsolicited proposal,” said Wyndham Chairman of the
Board Stephen Holmes in the Monday morning press release. “The core issues we have articulated remain
the same: a likely prolonged regulatory review period of up to 24 months with
an uncertain outcome; the pure inadequacy of the Offer from a valuation
standpoint, including the significant equity component of Choice stock; and the
lack of consideration for Wyndham’s superior, standalone growth prospects. Our
Board has made itself consistently clear on these risks, but Choice continues
to ignore what is in the best interests of Wyndham shareholders by repeatedly
proposing illusory and unrealistic offers while making inconsistent and
misleading public statements. We are confident Wyndham can deliver long-term
shareholder value well in excess of the $85 per share offered by Choice by
continuing to execute on our existing business plan. The Board is steadfast in
our recommendation that shareholders not tender their shares into this offer,
and we remain fully committed to acting in the best interests of all Wyndham
shareholders.”
Hotel Investment Today has reached out to Choice Hotels for a response to Wyndham's latest statement.
Wyndham called Choice’s portrayal of its $9 per share growth
potential “an egregious mischaracterization and fails to reflect the outlook
Wyndham provided in its October investor presentation, which provides the
roadmap for an incremental $20 per share from EBITDA growth potential over the
next two years with an additional $16 per share from the deployment of
available capital during that period.”
Wyndham also stated its standalone plan does not rely on
overleveraging its balance sheet and can be achieved with leverage remaining in
the lower half of Wyndham’s stated target range at 3.5x.
Post-transaction, Choice’s leverage level would surpass all other lodging peers' average leverage ratios – negatively affecting not only the value of the equity consideration in the Offer, but also limiting Choice's ability to invest in future growth.
Wyndham Hotels & Resorts
Wyndham added that the Choice offer represents “a mere 4%
premium to Wyndham's 52-week high and a 10% premium to Wyndham's current
stock price (as of December 15, 2023).” Wyndham stated since the announcement
of Choice’s proposal on October 17, Wyndham’s share price has recovered to 95%
of its 52-week high, which is generally consistent with the broader lodging
sector performance of 99%.
Wyndham called Choice’s proposed ticking fee “illusory as
crafted” and said Choice’s stock is at significant risk for further price
degradation, with a slower-growing business. “Post-transaction, Choice’s
leverage level would surpass all other lodging peers' average leverage ratios –
negatively affecting not only the value of the equity consideration in the
Offer, but also limiting Choice's ability to invest in future growth.”
Lastly on Monday, Wyndham said Choice’s offer is subject to “a
litany of conditions, which make the consummation of the offer highly
uncertain.” It said Choice has not arranged committed financing, despite “numerous
calls with potential financing sources” for more than four months. Wyndham
added that the offer also includes a non-customary “Diligence Condition,” which
the Wyndham Board believes is designed solely to serve as a one-way exit
option to the offer in favor of Choice.