Choice Hotels (NYSE:CHH) International is urging the board of Wyndham Hotels & Resorts (NYSE:WH) to return to negotiations regarding a potential merger. This appeal came after Wyndham rejected Choice's acquisition offer, which had increased from $80 per share in April to $85 per share, amounting to a total of $7.8 billion. The offer was turned down by Wyndham due to concerns about potential regulatory risks.
On Wednesday, October 25, 2023, Patrick Pacious, CEO of Choice Hotels, based in Rockville, Maryland, expressed readiness for swift negotiations on the deal's terms and emphasized the importance of ongoing discussions for shareholders' interest. He stated that the two companies were within a "negotiable range" recently.
Choice's proposal values each Wyndham share at $90.00, representing a 14.9x multiple of Wyndham's consensus 2023 EBITDA estimates. This could potentially generate over $2 billion in shareholder value through synergies. The proposed merger would intensify competition against larger industry players, decrease franchisee costs by encouraging direct bookings, and create a rewards program comparable to the top two global hotel rewards programs.
The combined company would adopt an asset-light franchising model, which is expected to generate durable and predictable free cash flow. This model, coupled with significant Adjusted EBITDA margin expansion and high free cash flow, is anticipated to support pro-competitive growth investments.
Pacious expressed gratitude for the positive feedback from both companies' shareholders and franchisees and highlighted the pro-competitive nature of the merger. He voiced concern over Wyndham's unilateral decision to end discussions and strongly urged them to return to negotiations.
Choice has demonstrated its capacity to create shareholder value, with a compound annual growth rate (CAGR) of approximately 10% since 2017. The company has also successfully integrated the Radisson and WoodSpring Suites acquisitions.
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