[1/2]Geoffrey Ballotti, CEO of Wyndham Hotels & Resorts, Inc. rings the opening bell at the New York Stock Exchange (NYSE) in New York City, U.S., June 5, 2023. Portal/Brendan McDermid/File Photo ACKNOWLEDGE RIGHTS
Oct 17 (Portal) – U.S. budget hotel operator Wyndham Hotels and Resorts (WH.N) on Tuesday rejected rival Choice Hotels’ (CHH.N) $7.8 billion cash and stock takeover offer, called it “disappointing” and cited regulatory risks surrounding a possible combination.
With nearly 1.5 million rooms worldwide between the two hotel groups, the combined company could face regulatory scrutiny, analysts said.
Wyndham shares rose as much as 13% to $78.48, but were well below the offer price of $90 per share, which was 30% above the stock’s close on Monday.
On Tuesday, Choice Hotels went public with its offer to buy Wyndham after months of private talks failed.
A potential merger would have united Choice Hotels brands such as Econo Lodge, Quality Inn and Clarion with Wyndham’s Days Inn and Travelodge, providing inflation-hit customers with a wide choice of affordable hotels.
Choice said it first approached Wyndham in April with an offer of $80 per share and later increased the offer to $85. Both companies were priced within a “negotiable range” a few weeks ago, the Rockville, Maryland-based company said Tuesday.
UBS analysts said unit growth has been a challenge for Choice, which has nearly 7,500 hotels in 46 countries and territories, and has focused on acquisitions for its growth.
New Jersey-based Wyndham operates and markets a hotel portfolio of 24 brands located primarily in secondary and tertiary cities, according to its annual filing.
Portal reported in May about a possible deal between the two companies.
Choice’s offer is “highly conditional and subject to significant business, regulatory and execution risks. Choice was unwilling or unable to address our concerns,” Wyndham said Tuesday, adding that the offer undervalued it.
Some analysts said the size of the combined company would require some divestiture.
“However, big questions remain, the biggest being regulatory approval/antitrust, considering there would be a heavy concentration of economy and midscale rooms in the U.S.,” said Truist analyst Patrick Scholes.
Scholes added that Choice Hotels was confident of receiving regulatory approvals during Tuesday’s talks and believed the merger would have been “pro-competitive.”
Choice had offered $49.50 in cash and 0.324 shares of common stock for each Wyndham share. Including debt, the deal was worth about $9.8 billion.
As of Monday’s close, Choice had a total market capitalization of $6.29 billion, while Wyndham’s was at $5.82 billion.
Reporting by Priyamvada C, Shivansh Tiwary in Bengaluru, Doyinsola Oladipo in New York; Edited by Shinjini Ganguli
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