Why Wyndham Rejected Choice Hotels’ ‘Desperate’ $7.8 Billion Takeover Bid

26.10.2023 - 16:23 / forbes.com / Geoff Ballotti

On a third-quarter earnings call Thursday morning, Wyndham Hotels & Resorts outlined for investors its rationale for rejecting a $7.8 hostile takeover bid from budget-hospitality rival Choice Hotels. Including assumed debt, the deal value would climb to around $9.8 billion.

Early last week, Choice announced that it had made a third unsolicited $7.8 billion unsolicited offer to acquire Wyndham in a cash and stock deal. The valuation of Wyndham at $90 a share represents a 24% premium to the stock’s current price of $72.72. Wyndham subsequently confirmed it has rejected the offer, after which Choice released a statement calling upon Wyndham to “engage in good faith discussions.”

But on Thursday’s earnings call, Wyndham Chairman Stephen P. Holmes strongly expressed why he thought it was a bad deal for shareholders. “They made unsolicited overtures to acquire our business with no organic growth, a less vibrant loyalty program and virtually no international capabilities in Choice’s platform,” he said. “We are frankly not surprised. Our business offers a medicine cabinet full of remedies.”

Were the deal to go through, it would be a massive merger in the economy hotel chain space, with the sixth-largest hotel group in North America acquiring the fifth-largest to create the continent’s largest budget hotel franchisor. Choice Hotels operates nearly 7,500 properties spanning 22 brands, including Comfort Inn and Quality Inn. Meanwhile, Parsippany, New Jersey-based Wyndham describes itself as the largest hotel franchisor in the world, with 9,280 locations across 24 brands in 95 countries. The stable runs the gamut from economy chains like Days Inn and Super 8 to mid-range brands like Ramada and La Quinta to upscale hotels like the eponymous Wyndham.

But Holmes told investors he didn’t appreciate the way Choice has conducted itself “through their PR machine.”

“It’s not attractive, what they’re doing. If you want a friendly deal done, you don’t approach it the way they’ve approached it,” Holmes said. “I used to always say that I don’t comment on M&A rumors—but this one is not a rumor, and it also is not really M&A. It seems like a desperate grab to try to solve problems that the company has.”

On Wyndham’s earnings call, Holmes and company president & CEO Geoff Ballotti walked analysts through a 33-page presentation that laid out three main reasons why the “underwhelming offer” was not in the best interest of Wyndham and its shareholders.

First, Ballotti told investors, “an uncertain regulatory timeline” means that Wyndham shareholders would take on “asymmetrical risks” over a potentially long period of business disruption without adequate protections. Wyndham believes a deal would be subject to an FTC