Wyndham Hotels & Resorts Inc. said Tuesday it would carefully review and evaluate an exchange offer from Choice Hotels International Inc., which is taking its hostile bid for Wyndham straight to its shareholders.
Choice
CHH,
said early Tuesday it would have preferred a negotiated agreement, but as the Wyndham
WH,
board has refused to explore a deal, it has left it with no other option.
Choice is offering $49.50 a share in cash, plus 0.324 shares of its common stock, equal to a cash value of $40.50, based on Choice’s trading price as of Oct. 16, the last day before it announced its bid.
“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,” the hotel chain said in a statement.
Those concerns include asymmetrical risk for Wyndham shareholders, given the uncertainty about regulatory signoff and the lengthy estimated timeline of 24 months for the deal to close, previously cited by Choice, said the statement.
Wyndham also believes the offer is inferior to its own stand-alone growth prospects, and questioned the future value of Choice shares given the high level of leverage required to close a deal.
The board expects to advise shareholders of its recommendation within 10 business says.
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,” said Choice CEO Patrick Pacious in a statement.
“It remains our 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.”
Choice said it currently holds 1.5 million shares of Wyndham’s common stock that valued at more than $110 million and that it would file the Hart-Scott-Rodino notification later Tuesday to start the required regulatory review.
The exchange offer will expire on Friday, March 8, 2024, unless its extended or terminated.
Choice also noted that it has added additional protections for Wyndham shareholders, including a reverse termination fee of $435 million, which is equal to about 6% of the total equity purchase price.
It’s also offering a regulatory ticking fee of 0.5% of the total equity purchase price a month, accruing daily, after the first anniversary of a definitive agreement. It’s also committed to taking all actions required by regulators to get the deal over the wire.
“Instead of discussing the terms of such proposal with Choice, Wyndham publicly rejected the proposed terms on Nov. 21, 2023,” said Choice.
Wyndham’s stock was up 1%Tuesday and has gained 11% in the year to date, while the S&P 500
SPX,
has gained 20%.
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