Choice Hotels International announced a proposal to acquire all the outstanding shares of Wyndham Hotels & Resorts at a price of $90 per share — a total of $7.8 billion — payable in a mix of cash and stock. With the assumption of Wyndham’s net debt, the proposed transaction is valued at approximately $9.8 billion, according to Choice.

According to Choice, the proposal was made after Wyndham management “disengaged” from acquisition talks after six months of negotiations. Patrick Pacious, CEO of Choice, said his company has long respected Wyndham’s business and is confident that this combination would significantly accelerate both Choice’s and Wyndham’s long-term organic growth strategy for the benefit of all stakeholders.

According to Pacious, a few weeks ago Choice and Wyndham were in “a negotiable range” on price and consideration, and both parties had a shared recognition of the value opportunity this potential transaction represents. He said Choice executives were therefore “surprised and disappointed” that Wyndham decided to disengage.

While Choice would have preferred to continue discussions with Wyndham in private, said Pacious, following Wyndham’s 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,” he added, “we remain convinced of both the many benefits of the combination and our ability to complete it.”

According to Choice, the acquisition would be a win for franchisees, who would gain lower total cost of ownership and increased profitability; shareholders, who would gain superior value creation; guests, who would get more lodging options and value; and employees, who would enjoy expanded opportunities and increased stability.

Wyndham’s board released a statement saying its board of directors had unanimously rejected the offer after it determined that:

• the proposed transaction involves significant business and execution risks, including an extended regulatory timeline and uncertainty of outcome, potential franchisee churn, and excessive leverage levels at the pro forma combined company
• the consideration mix includes a significant component of Choice stock, which the Board believes is fully valued relative to Choice’s growth prospects, especially when compared to Wyndham
• the offer is opportunistic and undervalues Wyndham’s future growth potential

Stephen Holmes, chairman of the Wyndham board, said “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.”

Image: Choice Hotels