Wyndham is playing very hard to get. And unless lovestruck Choice is equipped to sweeten its offer, it may view this target forever as the one who got away.
Wyndham isn’t warming to Choice’s latest attempt at a hostile takeover, and characterized it Tuesday as a “step backwards.”
“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,” Wyndham stated Tuesday. “At Choice’s current share price, its offer to acquire all outstanding shares of Wyndham stands at a value of $86 per share.”
Wyndham stated that it received a letter from Choice CEO Pat Pacious November 14 — what it is said is the first communication from Choice since going public with an unsolicited bid for $90 a share on October 17.
Wyndham has said the offer price undervalues its growth prospects and has expressed concern a deal would get stuck waiting for regulatory approval.
“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,” Wyndham stated.
Choice-Wyndham: Other Roadblocks to a Deal
The regulatory issue — and the possibility that a deal could get blocked and Wyndham would be twisting in the wind in the interim — is a big one for Wyndham.
“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,” said Stephen Holmes, the Wyndham chairman, in a statement.
He said Wyndham, which rejected Choice’s initial bid a month ago, would evaluate any serious proposal, which is its fiduciary duty to shareholders.
“But Choice continues to fail to adequately address any of the three core issues we have repeatedly raised,” Holmes stated. “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.”
Wyndham believes that Choice’s hostile bid undervalues Wyndham’s standalone growth potential, expressed concerns about Choice’s growth prospects and the levels of debt that the deal would require, and objects to the regulatory risks and the deal timeline.
“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,” Holmes wrote in response to the Choice letter.
Choice CEO Pacious argued to the contrary in his November 14 letter to Wyndham.
“We made a compelling offer to you on October 17, 2023, and are responding to your request for more clarity regarding risk allocation in the context of the regulatory framework. The industrial logic of the Transaction is irrefutable, and as already discussed amongst principals and legal advisors over the past few months, this transaction is pro-competitive and the required regulatory approvals are obtainable,” Pacious wrote to Wyndham November 14.
See the texts of the Choice communication to Wyndham, and the Wyndham response below.
Choice November 14 letter to Wyndham
Wyndham’s November 21 Response to Choice