Choice Hotels International all but confirmed reports it was buying up shares of Wyndham Hotels & Resorts in an attempt to place directors on Wyndham's board who would vote in favor of an acquisition by Choice.
Asked about a Reuters article citing anonymous sources laying out this plan, Choice released this statement: “We are committed to reaching a transaction with Wyndham, and we intend to pursue all paths available to us to get there.”
Reuters reported Monday that “Choice has become a Wyndham shareholder by snapping up its shares in the open market and plans to raise its stake in the coming days.” This strategy would allow Choice to nominate directors to Wyndham’s board in January, increasing the likelihood of a deal getting done.
C. Patrick Scholes, managing director of lodging and leisure equity research at Truist Securities, said Choice's decision to entertain a hostile takeover wasn’t necessarily expected, but it had to get more aggressive given the lack of success with friendly negotiations.
This doesn’t rule out Choice and Wyndham returning to the negotiating table, but there currently doesn’t seem to be a lot of dialogue between the two, he said.
Scholes said Wyndham’s next steps are to either go back to the negotiating table to get a better offer for its shareholders or convince its shareholders that the deal isn’t fruitful.
It’s not an easy path, but Scholes said he believes a deal will be reached between the two.
“Whether it's an easy way or the hard way, I would suspect it's more likely than not that it gets done,” he said. “I would suspect that Choice probably nudges their offer up a bit and gets it done but obviously no guarantee.”
Choice Hotels International CEO Pat Pacious said during the company’s third-quarter earnings call on Nov. 7 that the decision to make its offer for Wyndham Hotels & Resorts public in October was the result of little progress in private discussions, and he called on Wyndham to come back to the negotiating table.
Choice privately offered to buy Wyndham three separate times over a four-month span, starting with an offer of $80 per share in April. The offer increased to $85 per share in May and $90 in August. The final offer of $90 per share is what Choice took public on Oct. 17.
Wyndham executives have been vehemently opposed to a deal thus far. Chairman Stephen Holmes called the offer “underwhelming, highly conditional, and subject to significant business regulatory and execution risk” in response to discussions going public in October.
Most recently, Wyndham rebuffed Choice again over a letter the company sent in an attempt to restart talks. In a response to Choice, Holmes wrote the newest letter was "a step backwards despite being delivered nearly a full month after you decided to unilaterally go public with your unsolicited proposal."