[1/2]Jeffrey Ballotti, CEO of Wyndham Hotels & Resorts, rings the opening bell at the New York Stock Exchange (NYSE) on June 5, 2023 in New York City, USA.Reuters/Brendan McDiarmid/File Photo Obtaining license rights
Oct 17 (Reuters) – U.S. budget hotel operator Wyndham Hotels & Resorts (WH.N) on Tuesday announced a $7.8 billion cash and stock takeover offer from rival Choice Hotels (CHH.N). was rejected due to regulatory risks, calling it “overwhelming.” About possible combinations.
Both hotel groups have about 1.5 million rooms worldwide, analysts said, and the combined entity could face regulatory scrutiny.
Wyndham’s stock price rose as much as 13% to $78.48, well below its offering price of $90 per share, which was a 30% premium to Monday’s closing price.
Early Tuesday, Choice Hotels made public its offer to buy Wyndham after months of private negotiations collapsed.
A potential merger would see Choice Hotels brands such as Econo Lodge, Quality Inn and Clarion merge with Wyndham’s Days Inn and Travelodge to create an affordable option for customers hit by inflation. The hotel will offer a wide choice of prices.
Choice said it first approached Windham in April with an offer of $80 a share, which it later raised to $85. The Rockville, Md.-based company said Tuesday that prices between the two companies were within a “negotiable range” a few weeks ago.
For Choice, which has about 7,500 hotels in 46 countries and territories, unit growth has been difficult and it has turned to acquisitions to grow, UBS analysts said.
New Jersey-based Wyndham operates and franchises a hotel portfolio of 24 brands primarily located in second- and third-tier cities, according to its annual report.
Reuters reported in May about a possible deal between the two companies.
Wyndham said Tuesday that Choice’s proposal is “highly conditional and exposes us to significant business, regulatory and enforcement risks. Choice is unwilling or unable to address our concerns.” said the proposal, adding that it was undervalued.
Some analysts said the larger size of the combined company would necessitate some divestitures.
“Given the concentration of economy and midscale rooms in the U.S., the biggest questions are regulatory approvals and antitrust issues, which remain significant,” said Patrick Scholes, an analyst at Trust. There are still questions,” he said.
Scholes added that during Tuesday’s conversation, Choice Hotels was confident in gaining regulatory approval and believed the merger would be “pro-competitive.”
Choice was offering $49.50 in cash and 0.324 shares of common stock for each Wyndham share. Including debt, the contract value is approximately $9.8 billion.
As of Monday’s close, Choice’s market capitalization was $6.29 billion, compared to Wyndham’s $5.82 billion.
Reporting by Priyamvada C. and Shivansh Tiwary in Bengaluru and Doinsola Oladipo in New York.Editing: Shinjini Ganguly
Our standards: Thomson Reuters Trust Principles.
