Choice Hotels Ends Attempt to Acquire Wyndham Hotels & Resorts: The Federal Trade Commission (FTC), Wyndham and Other Companies Breathe a Sigh of Relief

They saw it as a pro-competitive move that would generate significant value. Unfortunately for Choice, the reactions to their proposal were far from positive. Wyndham Hotels and Resorts, the target of the deal, rejected the offer and instead, Choice had to resort to a hostile takeover attempt.

Choice Hotels International, Inc. made a bold move on October 17, 2023, by proposing to acquire all outstanding shares of Wyndham Hotels & Resorts, Inc. for $90.00 per share. This offer included $49.50 in cash and 0.324 shares of Choice common stock for each Wyndham share. The proposal not only offered a 26% premium to Wyndham's 30-day volume-weighted average closing price but also an 11% premium to its 52-week high and a 30% premium to its latest closing price.

Additionally, Choice's initial proposal allowed Wyndham shareholders to choose between cash, stock, or a combination of both, thanks to a cash or stock election mechanism with a customary proration mechanism in place.

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Patrick Pacious, President and Chief Executive Officer of Choice Hotels, said, "We have long respected Wyndham's business and are confident that this combination would significantly accelerate both Choice's and Wyndham's long-term organic growth strategy for the benefit of all stakeholders. For franchisees, the transaction would bring Choice's proven franchisee success system to a broader set of owners, enabling them to benefit from Choice's world-class reservation platform and proprietary technology to drive cost savings and greater investment returns. Additionally, the value-driven leisure and business traveler would benefit from the combined company's rewards program, which would be on par with the top two global hotel rewards programs, enabling them to receive greater value and access to a broader selection of options across stay occasions and price points."

"A few weeks ago, Choice and Wyndham were in a negotiable range on price and consideration, and both parties have a shared recognition of the value opportunity this potential transaction represents. We were therefore surprised and disappointed that Wyndham decided to disengage. While we would have preferred to continue discussions with Wyndham in private, following their unwillingness to proceed, we feel there is too much value for both companies' franchisees, shareholders, associates, and guests to not continue pursuing this transaction. Importantly, we remain convinced of both the many benefits of the combination and our ability to complete it," concluded Pacious.

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In summary, the deal proposed Wyndham shareholders stood to gain significantly from a 26% premium to the 30-day volume-weighted average closing price, an 11% premium to the 52-week high, and a 30% premium to the latest closing price. This move is expected to result in annual synergies of around $150 million, paving the way for growth opportunities and operational efficiencies. Creating a top-tier rewards program with great benefits and hotel options through partnerships. To builds a global network for budget travelers with easy booking.

Later in October, Wyndham made it clear that they were not interested in an $8 billion buyout offer from Choice. They believed that the offer was opportunistic and did not accurately reflect the potential for growth within their company. The rejection of the offer was unanimous among the board members of Wyndham.

However, by December 12, 2023, Choice Hotels International decided to take a different approach. They announced that they would be initiating an exchange offer to acquire Wyndham Hotels & Resorts directly. Choice believed that a transaction with Wyndham would be beneficial for both companies, their shareholders, franchisees, guests, and associates.

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They saw it as a pro-competitive move that would generate significant value. Unfortunately for Choice, the reactions to their proposal were far from positive. Wyndham Hotels and Resorts, the target of the deal, rejected the offer and instead, Choice had to resort to a hostile takeover attempt. To make matters worse, an association representing the majority of hoteliers who own Choice and Wyndham-branded properties also expressed strong opposition to the deal.

“We all don’t know what’s driving this merger. Many of us feel it’s not needed,” said Bharat Patel, the chairman of the organization, the Asian American Hotel Owners Association. The group surveyed its 20,000 members and found that about 77 percent of respondents who own hotels under either brand or both thought a merger would hurt their business.

Choice's latest exchange offer to Wyndham shareholders, who own popular hotel brands like Days Inn, La Quinta, and Ramada, remained unchanged from their previous bid. The offer consisted of $49.50 in cash and 0.324 shares of Choice common stock for each Wyndham share.

Unfortunately, Choice's exchange offer expired on Friday. In addition, the company announced on Monday that it was retracting its list of director nominees for Wyndham's board. “Choice intends to continue focusing on its standalone strategy, which the company is confident will create significant long-term value for its stockholders and franchisees,” it said in a prepared statement.

“The Wyndham board is pleased that Choice has ended its hostile pursuit and proxy contest, following the expiration of its unsolicited exchange offer,” Wyndham Chairman Stephen Holmes said in a news release. “We are confident in Wyndham’s standalone strategy and growth prospects under the leadership of our proven management team. The Board remains committed to acting in the best interests of our shareholders and driving superior long-term value creation.”

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The Biden administration has taken a significantly more assertive approach compared to past administrations when it comes to scrutinizing antitrust matters, regardless of the industry involved.

Recently, the Federal Trade Commission shared that Choice Hotels International has decided to abandon its plans to acquire Wyndham Hotels & Resorts and has also withdrawn its nominations to replace Wyndham's Board of Directors. In light of this development, Henry Liu, the Director of the FTC Bureau of Competition, released the following statement:

Patrick Pacious, President and Chief Executive Officer of Choice Hotels, said, "We have long respected Wyndham's business and are confident that this combination would significantly accelerate both Choice's and Wyndham's long-term organic growth strategy for the benefit of all stakeholders. For franchisees, the transaction would bring Choice's proven franchisee success system to a broader set of owners, enabling them to benefit from Choice's world-class reservation platform and proprietary technology to drive cost savings and greater investment returns. Additionally, the value-driven leisure and business traveler would benefit from the combined company's rewards program, which would be on par with the top two global hotel rewards programs, enabling them to receive greater value and access to a broader selection of options across stay occasions and price points."

"A few weeks ago, Choice and Wyndham were in a negotiable range on price and consideration, and both parties have a shared recognition of the value opportunity this potential transaction represents. We were therefore surprised and disappointed that Wyndham decided to disengage. While we would have preferred to continue discussions with Wyndham in private, following their unwillingness to proceed, we feel there is too much value for both companies' franchisees, shareholders, associates, and guests to not continue pursuing this transaction. Importantly, we remain convinced of both the many benefits of the combination and our ability to complete it," concluded Pacious.

The FTC was closely scrutinizing Choice’s tender offer as well as its efforts to replace the Wyndham Board of Directors with its own hand-picked slate of nominees. Each of these actions posed serious competition questions and their abandonment is a win for consumers.

The FTC has made a commitment to closely monitor this industry and will not hesitate to enforce antitrust laws. This is to ensure that travelers have access to affordable and high-quality lodging, and that hotel franchisors compete fairly for franchisees. I would like to express my gratitude to the entire FTC team for their hard work on this important matter.

Choice Hotels International Inc., headquartered in Rockville, Maryland, manages approximately 7,500 hotels across 46 countries. They were looking to acquire a much larger chain, Wyndham, which operates over 9,000 hotels including Howard Johnson, Super 8, and Travelodge.

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