On Oct. 17, Choice Hotels International announced a plan to spend $7.8 billion in combined cash and stock, along with another $2 billion in assumed debt, to buy Wyndham Hotels & Resorts — in a deal Choice noted that Wyndham already had spurned weeks earlier.
The combination of these two companies would create a dominant player in midscale and economy hotels, but Wyndham executives are calling Choice's offer risky and unsolicited. For this aggressive move, Choice CEO Patrick Pacious is the Person of the Week.
WHO: Patrick Pacious, President and CEO, Choice Hotels International
STREET CRED: Pacious has served as CEO since 2017, when he was elevated from the role of president and chief operating officer of the company. He has worked with Choice since 2005. Before that he was an officer in the U.S. Navy. He has master's degree from Northwestern University's Kellogg Graduate School of Management and a bachelor's degree from Duke University.
WHAT HAPPENED? Frustrated that Wyndham executives decided to walk away from the negotiating table in September, Pacious and the Choice executive team went public with an offer for $90 per share. It includes $49.50 in cash and 0.324 of a share of Choice common stock for each share of Wyndham stock. The two companies have been in contact about a potential combination since April. Although they went public with their offer, Choice executives have not indicated a desire to wage a proxy battle and stage a true hostile takeover bid, instead saying they hope shareholders will see the value in the offer and Wyndham will re-engage in negotiations.
WHAT PACIOUS SAID: The Choice CEO said it's hard to ignore the potential of a combined Choice-Wyndham, noting "the value-driven leisure and business traveler would benefit from the combined company's rewards program, which would be on par with the top two global hotel rewards programs, enabling them to receive greater value and access to a broader selection of options across stay occasions and price points." He noted his company disagreed with Wyndham's executive's team's reluctance to move forward with a deal. "Choice and Wyndham were in a negotiable range on price and consideration, and both parties have a shared recognition of the value opportunity this potential transaction represents. We were therefore surprised and disappointed that Wyndham decided to disengage. While we would have preferred to continue discussions with Wyndham in private, following their unwillingness to proceed, we feel there is too much value for both companies' franchisees, shareholders, associates and guests to not continue pursuing this transaction. Importantly, we remain convinced of both the many benefits of the combination and our ability to complete it," Pacious said in a statement.
HOW OTHERS RESPONDED: Wyndham's Chairman Stephen Holmes quickly responded to the deal calling it "underwhelming" and an "opportunistic attempt to take advantage of point-in-time stock prices fluctuations coinciding with a time period where the exchange ratio is favorable to Choice." He also criticized Choice for underestimating the regulatory risk. "We have engaged with Choice and its advisers on multiple occasions to explore these risks. However, it became clear the proposed transaction likely would take more than a year to even determine if, and on what terms, it could clear antitrust review, and Choice was unable to address these long-term risks to Wyndham's business and shareholders."
WHAT'S NEXT? The next move seemingly is with Pacious and Choice, as they consider upping their offer or courting large Wyndham shareholders in favor of the deal. In a podcast conversation with Hotel News Now, C. Patrick Scholes, managing director of lodging and leisure equity research at Truist Securities, said the company could also opt to wage a proxy battle to get more favorable board members on the Wyndham board.
Editor's Note: CoStar News' Person of the Week feature highlights someone whose actions, statements or issues affected the commercial real estate industry. If you'd like to nominate someone for consideration, please email news@costar.com.