Choice Hotels International is asking shareholders of rival chain Wyndham Hotels & Resorts to approve a roughly $8 billion purchase after Wyndham broke off negotiations, the firm announced Tuesday.
Choice CEO Patrick Pacious stated, “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.” “As a result, we were surprised and disappointed when Wyndham decided to withdraw.” While we would have preferred to continue conversations with Wyndham in private after their refusal to advance, we believe there is too much value for both companies’ franchisees, stockholders, colleagues, and guests to not pursue this acquisition.”
Early Tuesday, Wyndham did not reply to a request for comment. Choice, headquartered in Rockville, Maryland, is paying $49.50 in cash and 0.324 shares of Choice common stock for each Wyndham share owned, representing a 20% premium over Wyndham’s most recent closing price.
Wyndham shareholders can opt for cash, shares, or a combination of cash and equity under Choice’s plan. The idea also includes Wyndham getting two seats on the combined company’s board of directors. The overall value of the transaction is around $7.8 billion. When debt is included in, the total worth is around $9.8 billion.
Choice approached Wyndham in April with an offer of $80.00 per share, with 40% cash and 60% Choice shares, but was refused, according to Choice. As the board chairs and CEOs of each company met, the offer was increased to $85 per share, then to $90 per share. However, according to Choice, Wyndham expressed worries regarding regulatory approval and the value of Choice stock in September.
Choice Hotels runs over 7,500 hotels in 46 countries. It is attempting to acquire Wyndham, which manages over 9,300 hotels under a variety of brands including Days Inn, Howard Johnson, La Quinta, Ramada, Super 8, and Travelodge.
Wyndham, situated in Parsippany, New Jersey, earned $355 million in profit on $1.5 billion in revenue last year. It, like most hotels, has benefited from increased travel in recent years. The increase in traffic has resulted in clogged airports and pilot shortages. This has cooled slightly this year as people become more cost-conscious about their vacations as a result of inflation and after spending more freely for more than a year.
Wyndham’s stock has risen more than 170% since the pandemic began, when it was trading near $25 per share. Wyndham Hotels & Resorts Inc. stock soared more than 15% before the market opened Tuesday, to $82.40. Choice Hotels International Inc.’s stock dropped more than 2%.
Wyndham Hotels History
The company’s roots may be traced back to the establishment of Hospitality Franchise Systems (HFS) in 1990 as a vehicle for acquiring hotel franchises. It had purchased the Days Inn, Howard Johnson, Ramada, and Super 8 trademarks by 1995. HFS subsequently expanded into other sectors before merging with CUC International to establish Cendant Corporation in 1997.
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Cendant purchased the Wyndham hotels brand from the Blackstone Group in 2005. Trammell Crow, president of Trammell Crow Company, founded the Wyndham hotel brand in 1981 in Dallas, Texas. The company appears to be named after Crow’s buddy, Wyndham Robertson, who wrote a feature on him for Fortune. Patriot American purchased the franchise as it flourished in 1998.
Wyndham Hotel Group was a branch of Wyndham Hotels Worldwide that had over 9,000 hotels under 21 brands in over 75 countries, competing in brand marketplaces ranging from economy to upscale. It employed around 40,000 people worldwide. Wyndham Hotel Management provided luxury properties with lodging management services.
Wyndham paid $150 million to Global Hyatt Corporation for U.S. Franchise Systems, the owner of the Microtel and Hawthorn Suites brands. In 2008, Wyndham purchased the Wisconsin-based Exel Inn business and changed all 22 of its locations to Wyndham brands. Wyndham purchased the TRYP hotel brand from Sol Meliá Hotels & Resorts of Spain in 2010. The brand, which was later rebranded Tryp by Wyndham, was positioned as a “select-service, midmarket” brand.
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