After buying Radisson Americas in 2022 (67,000 keys) the franchisor is interested in its closest competitor Wyndham Hotel group (802,269 rooms as of January 1st, 2023). But the project is not that easy this time, Wyndham having rejected several times the offer. One question is to be asked, would Choice become too big on the American market regarding its competitors.
The rumor had already spread in May this year, announcing an American budget hotel giant. Both companies have a lot in common being franchisors only and while historically positioned on budget and economy segments, recently starting to work on upscale offering with Registry Collection Hotels for Wyndham launched in 2021 and the purchase of Vienna House for €44 million.
As of January 1st, 2023, Choice Hotels was number 8 worldwide with 627,804 rooms and is willing to eat the number 6 Wyndham Hotel Group. If completed, this purchase would see the birth of the second largest hotel group worldwide just behind another American, Marriott International.
However, the deal is far from being done as “Wyndham Board if Director rejects unsolicited proposal from Choice.”
“Choice’s offer is underwhelming, highly conditional, and subject to significant business, regulatory and execution risk. Choice has been unwilling or unable to address our concerns,” said Stephen P. Holmes, Chairman of the Wyndham Board of Directors. “While our Board would support a value-maximizing transaction, given the substantial, unmitigated embedded risks and value destruction potential presented by the proposed transaction, our Board determined it is not in the best interests of Wyndham shareholders. We have engaged with Choice and its advisors on multiple occasions to explore these risks. However, it became clear 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 to Wyndham’s business and shareholders. We are disappointed that Choice’s description of our engagement disingenuously suggests that we were in alignment on core terms and omits to describe the true reasons we have consistently questioned the merits of this combination – Choice’s inability and unwillingness to address our significant concerns about regulatory and execution risk and our deep concerns about the value of their stock.”
In a period of financial uncertainty, Wyndham stresses out the various conditions that may jeopardies the deal in its press release. One of the most important points being the fact that the buy at $90 per share would be $49.5 in cash and the rest in 0.324 shares of Choice common stock.
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."