WH - Wyndham Board Determines New Choice Letter is Step Backwards | Benzinga
Choice Looks to Impose Two Years of Regulatory Limbo and Significant Business Risk on Wyndham Shareholders and Fails to Address Substantial Concerns with Prior Offer Now Valued at $86
PARSIPPANY, N.J., Nov. 21, 2023 /PRNewswire/ -- Wyndham Hotels & Resorts (NYSE:WH) ("Wyndham" or the "Company"), the world's largest hotel franchising company with approximately 9,100 hotels spanning more than 95 countries, today announced that its Board of Directors received a letter from Choice Hotels International, Inc. (NYSE:CHH) ("Choice"), on November 14, 2023. Wyndham's Board of Directors, together with its financial and legal advisors, closely reviewed Choice's letter and determined that it represents a step backwards and that the terms Choice outlined are not in the best interests of Wyndham or its shareholders. Wyndham responded to Choice in a letter dated November 21, 2023, included below.
Choice's first communication in a month since its public disclosure of its unsolicited proposal contains no change to the form of consideration and continues to undervalue Wyndham's standalone growth prospects. At Choice's current share price, its offer to acquire all outstanding shares of Wyndham stands at a value of $86 per share[1], below the nominal value of $90 per share proposed on October 17, 2023, the date of Choice's public disclosure. The letter proposes a two-year period for Choice to seek to obtain regulatory approvals supported only by a low 6% reverse termination fee, which would both create a prolonged period of limbo and expose Wyndham and its shareholders to significant asymmetrical risk.
Stephen P. Holmes, Chairman of the Wyndham Board of Directors, said, "Choice continues to ignore our major concerns around value, consideration mix, and asymmetrical risk to our shareholders given the uncertainty around regulatory timeline and outcome. In addition, Choice's existing proposal is valued at $86 per share, lower than the unsolicited public proposal of $90 per share they made a month ago. Given they now explicitly acknowledge the legitimate issues around the regulatory timeline, they are essentially asking our shareholders to take on serious risk and accept as compensation for a failed deal a low reverse termination fee that doesn't even begin to compensate for the potential lost earnings and long-term impairment to value that could occur during an uncertain two-year regulatory review. In line with our fiduciary duties, we will of course always evaluate any serious proposal, but Choice continues to fail to adequately address any of the three core issues we have repeatedly raised. They have instead chosen to prolong this for months with a proposal that remains unfeasible, damaging to our business, and unnecessarily distracting to our management team."
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[1] Reflects value as of 11/20/2023, assuming $49.50 in cash and 0.324 Choice shares for each Wyndham share.
The following is the full text of Wyndham's letter to Choice on November 21, 2023, in response to Choice's letter:
Dear Stewart,
We received Pat Pacious' letter of November 14 and shared it with our Board of Directors who discussed it at a special meeting.
While you characterize the letter as your fifth, the real question is whether the letter advances the discussion. Unfortunately, this letter does not, and in fact represents a step backwards despite being delivered nearly a full month after you decided to unilaterally go public with your unsolicited proposal.
We have repeatedly articulated three primary concerns: (1) undervaluation of our superior, standalone growth prospects, (2) the value of Choice shares relative to its growth prospects and further compromised by elevated levels of leverage that this deal would require, and (3) the uncertain regulatory timeline and outcome and resulting significant asymmetrical risk to our shareholders.
Unfortunately, despite your assertion to the contrary, your letter fails to adequately address any of these concerns and therefore a combination on the terms you propose continues to not be in the best interest of Wyndham or its shareholders.
As to the first and second concerns, they are not even mentioned in your letter, let alone solved, despite your public comments that you were prepared to address them with available tools and our repeated guidance that an all-cash deal would obviate concerns about Choice's shares. Also, while you frame your proposal as being $90 per share, it is actually currently valued at $86 per share.
With respect to the regulatory issues and terms, we wanted to first address misrepresentations in your letter, as well as ones that have been raised in prior conversations:
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- Neither we nor our advisors have ever described this transaction as "pro-competitive."
- Neither we nor our advisors have ever stated that clearance of the transaction is certain.
- We have repeatedly expressed our serious concerns and, if anything, they have only increased since you chose to unilaterally go public with your proposal. The reception from the Wyndham franchisee community has been unenthusiastic to say the least, as evidenced by the vehement opposition from AAHOA, which represents about two-thirds of our respective franchisees.
With respect to the proposed terms relating to regulatory matters, while you have put some specific numbers to prior qualitative statements, they continue to fall far short of what is required to address the asymmetrical risk to ...