Choice Hotels nominates board directors in hostile Wyndham bid (updated)

Choice Hotels International

22/01/2024 12:00

(Updates to change sourcing throughout, adds CEO comment in
paragraph 4)
    By Anirban Sen
       NEW YORK, Jan 22 (Reuters) - Choice Hotels International
 CHH.N  pressed ahead with its $8 billion hostile bid for
Wyndham Hotels & Resorts  WH.N  on Monday by nominating a slate
of directors to replace Wyndham's eight-member board. 
    It is Choice's latest attempt to break a stalemate after
trying for most of the last year to negotiate a deal with
Wyndham, which has rebuffed the bid as low-premium and fraught
with antitrust risk. Wyndham has also raised concerns about the
combined company carrying too much debt and a slowdown in
Choice's business.
    Choice said its slate of nominees includes hospitality
industry veteran Jay Shah, who currently serves on the board of
private equity-backed HHM Hotels; Susan Schnabel, founder of
aPriori Capital Partners which advises private equity on
leveraged buyouts; James Nelson, CEO of real estate investment
trust Global Net Lease  GNL.N ; and Fiona Dias, who served on
Choice's board from 2004 to 2012. 
    "The current Wyndham board continues to refuse to engage in
meaningful negotiations regarding a combination with Choice that
would create extraordinary value. By supporting these nominees
and participating in our exchange offer, Wyndham shareholders
can send a clear message to the Wyndham board," said Patrick
Pacious, CEO of Choice. 
    Choice's board nominees also include Barbara Bennett,
founder of consulting firm Bennett West and a former Discovery
Communications executive; Emanuel Pearlman, who serves on
several public-company boards including Diebold Nixdorf  DBD.N ,
and Network-1 Technologies  NTIP.A ; Nana Mensah, who serves on
the board of Darden Restaurants which operates brands such as
Olive Garden and Longhorn Steakhouse; and William Grounds, a
veteran of the real estate and hospitality industries, who
serves on the board of PointsBet Holdings  PBH.AX .
    Wyndham declined to comment. 
    Reuters first reported about the slate of nominees earlier
on Monday and was also first to report on Nov. 27 that Choice
was preparing to nominate directors to the board of Wyndham. The
move gives Wyndham shareholders a way to push for the deal by
turning the vote on board directors in the spring into a
referendum on whether the company should open negotiations with
Choice. 
    Choice also unveiled last month an exchange offer for
Wyndham's stock, appealing directly to its shareholders, after
disclosing a stake worth more than $110 million. While that
offer cannot become effective - even if a majority of Wyndham
shareholders take it up - without the backing of Wyndham's
board, it is aimed at adding to pressure on Wyndham to engage. 
    Rockville, Maryland-based Choice operates nearly 7,500
hotels in 46 countries in the upper-midscale and upscale
segments, including brands such as Radisson, Country Inn &
Suites, and Cambria Hotels.     
    Parsippany, New Jersey-based Wyndham, which franchises about
9,100 hotels across more than 95 countries, operates brands such
as Travelodge, Ramada, Days Inn and Microtel. 
    Choice has said it has made four offers to Wyndham, with its
latest cash-and-stock bid currently worth about $92 per share.
This represents a 34% premium to Wyndham's closing share price
on Oct. 16, the last trading day before Choice made its offer
public. 
    Wyndham has said it can achieve a higher valuation on its
own, projecting compounded annual growth in adjusted earnings
before interest, taxes, depreciation and amortization of between
7% to 10% through 2026. It has said that its adjusted EBITDA
growth recently reached 6%.
    Wyndham has also argued that the combined company would have
market share of more than 55% market share in the economy and
midscale hotel sectors, triggering a potential 24-month review
by antitrust regulators that could result in the deal being shot
down. It also says that the potential deal has now attracted
scrutiny from four state attorneys generals and that some upset
franchisees could flee if there was a deal.
    Choice has said it is confident it can secure antitrust
clearance for the deal, arguing that the two companies together
account for only 10% of U.S. room revenue, and has projected
that the combined company would generate about $1 billion of
free cash flow in 2024, allowing it to quickly pay down debt and
invest in its business.
    Choice has offered to pay Wyndham a break-up fee of $435
million were regulators to shoot down the deal, as well as a
ticking fee payable to Wyndham for every day the deal has not
been completed, starting one year after the companies agree a
merger. This ticking fee would be worth $38 million per month.  

 (Reporting by Anirban Sen in New York
Editing by Shri Navaratnam and Jason Neely)
 ((Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno; Reuters
Messaging: Signal/Telegram/Whatsapp - +1-646-705-9409))