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Wyndham Raises Concerns Over Choice Hotels’ Acquisition Amid Regulatory Scrutiny

 |  February 18, 2024

Wyndham Hotels and Resorts CEO Geoffrey A. Ballotti expressed heightened concerns over Choice Hotels International’s bid to acquire the company without the board’s approval. The Federal Trade Commission’s (FTC) “expansive” request for more information has only intensified these worries, Ballotti stated.

Wyndham CEO Geoffrey A. Ballotti highlighted that the company wasn’t caught off guard by the increased regulatory scrutiny but anticipated that complying with the requests from federal and state regulators would be time-consuming.

The FTC’s recent request for information, termed a second request, necessitates Wyndham to provide “virtually every communication and every piece of data” related to its competition with Choice Hotels International. Ballotti contextualized the rarity of such requests, emphasizing that they are issued for only around 1% of deals reviewed by the FTC, leading to extensive back-and-forth discussions and meetings with the agency, reported Law360.

Moreover, investigations initiated by attorneys general in Washington, Colorado, Kansas, and Vermont add to the regulatory burden. While Wyndham assured shareholders of expeditiously complying with the second request and cooperating with state regulators, it acknowledged the tremendous effort involved.

Related: Choice Hotels Challenges Wyndham’s Antitrust Claims in Proposed Acquisition

Highlighting the FTC’s particular interest, Ballotti cautioned shareholders about the potential ramifications of proceeding with the deal. He cited a recent report indicating that over 90% of significant merger investigations in 2023 resulted in government lawsuits to block the deal or the abandonment of the transaction.

During the webcast, Wyndham also referenced a survey of franchisees and the Asian-American Hotel Owners Association, indicating that two-thirds of domestic hotel owners from both Wyndham and Choice expressed willingness to consider leaving the franchise if the merger materializes.

Under federal antitrust law, both the FTC and the U.S. Department of Justice possess the authority to issue second requests for information. Companies must notify both antitrust enforcers when a merger meets a minimum threshold, currently set at $119.5 million. If either agency suspects that the union may hinder competition, it can request additional information.

Source: Law360