Dive Brief:
- Wyndham Hotels & Resorts called a recent Choice Hotels International proposal letter a “step backwards” in its latest public statements about Choice’s ongoing bid to acquire the hotel company.
- In a release, Wyndham shared the text of a letter it says it received from Choice CEO Patrick Pacious on Nov. 14. It also included a letter the chairman of Wyndham’s Board of Directors, Stephen Holmes, has sent in response. In his letter, Holmes says Pacious’ latest proposal does not “advance the discussion” and fails to address the company’s concerns.
- Wyndham’s response to Pacious’ letter paints a picture of a company frustrated with Choice’s ongoing public campaign to acquire it — and gives its shareholders a fuller picture of the negotiations that for months were shrouded in secrecy.
Dive Insight:
Wyndham noted that, based on Choice’s current share price, its latest proposal offers a value of $86 per share. Choice originally offered $49.50 per Wyndham share in cash plus 0.324 shares of Choice stock, which was worth $90 per share when Choice made its proposal public last month.
In his letter, Holmes reiterated Wyndham’s concerns about a deal, which it says Choice has persistently ignored. Those concerns include: Choice undervaluing Wyndham’s growth prospects, the value of Choice shares relative to its own growth prospects and an uncertain regulatory timeline.
To that last concern, Holmes offered a rare peek behind the curtain, revealing moments in the two companies’ negotiations that were previously unknown to the public.
“For the first four months of our interactions, your team repeatedly conveyed confidence that the transaction would clear regulatory approvals within 60 days,” Holmes wrote, noting that “only after repeated conversations with our advisors” did Choice’s team acknowledge the possibility of an in-depth review from the Federal Trade Commission.
Holmes wrote that Choice’s stance on regulatory feasibility has shifted since initial discussions, with Choice now proposing a two-year period to seek regulatory approval. “This significantly exacerbates our concerns about the potential substantial damage and disruption to our business during this time,” Holmes continued.
Holmes also claimed that Choice’s franchise sales team and executive leadership are taking advantage of rumors about an acquisition.
“Since May, when your interest was leaked to the Wall Street Journal, your franchise sales team and executive leadership have been actively exploiting the uncertainty around Wyndham that you created to seek a competitive advantage in the market for franchisees and development partners,” Holmes wrote.
“For example, your representatives have told owners and prospects that completion of the acquisition is a ‘100% certainty,’ in an apparent attempt to discourage them from doing business with Wyndham,” he added.
Ultimately, Wyndham’s latest release confirms that — despite ongoing statements from its would-be buyer — the hotel company isn’t budging on the stance it’s held since Choice first made its wishes public.
Choice, meanwhile, continues to project conviction that a deal will go through.
“We are committed to reaching a transaction with Wyndham and we intend to pursue all paths available to us to get there,” a spokesperson told Hotel Dive in response to Wyndham’s letter Tuesday. “We believe the latest rejection is an unequivocal demonstration of the Wyndham Board and management team’s entrenchment as they continue to fail to fulfill their fiduciary duties by refusing to meaningfully explore a transaction that would deliver significant value to Wyndham shareholders and other stakeholders.”
In an earnings call with analysts last month, President and CEO Geoff Ballotti said a Choice acquisition would cause “irreparable damage to our business and erosion to Wyndham shareholder values.”
The Asian American Hotel Owners Association has also voiced concern, with the organization’s president and CEO, Laura Lee Blake, saying a merger could have “frightening” consequences.
If the merger were to happen, it would create one of the largest budget hotel owners in the U.S., and span nearly 17,000 locations worldwide.
