Wyndham Hotels & Resorts Inc. has officially dismissed Choice Hotels International Inc.’s takeover bid as “underwhelming,” leading to a highly anticipated showdown in the hospitality industry. Choice Hotels had proposed an acquisition deal valued at approximately $9.8 billion, which would have united the two companies into a budget hotel powerhouse.
The offer presented by Choice Hotels included a payout of $90 per share in both cash and stock, surpassing the value of Wyndham’s closing stock price on Monday by 30%, reported Bloomberg. After months of discussions regarding the potential transaction, Wyndham Hotels chose to terminate negotiations, forcing Choice Hotels to bring their proposal to the public eye.
Wyndham justified its decision by citing heightened regulatory risks associated with the deal, as well as concerns about potential franchisee turnover and an excessive financial burden. Wyndham’s Chairman, Stephen Holmes, emphasized the company’s apprehensions, stating, “Choice’s offer is underwhelming, highly conditional, and subject to significant business, regulatory, and execution risk. It became clear that the proposed transaction likely would take more than a year to even determine if, and on what terms, it could clear antitrust review, and Choice was unable to address these long-term risks.”
Following Wyndham’s announcement, its stock price surged by 8.7%, reaching $75.12 at 1:35 p.m. in New York. In contrast, Choice Hotels’ stock experienced a decline of 5.5%, dropping to $118. Despite this setback, Choice’s stock had previously seen an 11% increase since the beginning of the year, up to the closing price on Monday.
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Choice Hotels had initially presented its acquisition proposal in April, offering to purchase Wyndham at a rate of $80 per share. Over the subsequent weeks, they enhanced their offer, raising the price to $90 and increasing the cash component to 55%.
Choice Hotels defended their bid, asserting that they would not have made the offer if they were not confident that both their franchisees and guests would endorse the proposed merger and that the transaction would receive the necessary regulatory approvals.
In recent times, regulatory scrutiny over mergers and acquisitions has intensified under the Biden administration, with a focus on preventing deals that may hinder healthy competition. Lina Khan, designated by President Joe Biden to lead the Federal Trade Commission, has pledged to challenge companies that impede fair competition. The outcome of this proposed merger will be closely monitored within this evolving regulatory landscape.
Source: News Bloomberg Law