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Wyndham Hotels & Resorts (NYSE:WH) confirmed that the company’s board rejected a $9.8B takeover offer from Choice Hotels International (NYSE:CHH).
The Wyndham board of directors determined that the proposed transaction involves significant business and execution risks, including an extended regulatory timeline and uncertainty of outcome, potential franchisee churn, and excessive leverage levels at the pro forma combined company. In addition, the board said that the consideration mix includes a significant component of Choice (CHH) stock, which the board believes is fully valued relative to Choice’s (CHH) growth prospects, especially when compared to Wyndham Hotels & Resorts (WH). The offer was called “opportunistic” and said to undervalue Wyndham’s (WH) future growth potential.
Looking at the M&A offer, Jefferies believe that there is considerable embedded value within Wyndham Hotels (WH) that should be captured in any prospective deal. If another offer is made, analyst David Katz thinks regulatory scrutiny is a possibility and should also be reflected. “The announcement does, in our view, validate the prospective higher value for WH and the reflected value in CHH shares,” he noted.
Bernstein pointed to the gentle gains across the broad hotel sector after the first major merger discussion since Marriott-Starwood in 2015. The firm thinks an eventual deal would mean it is likely some excess hotels are available to other brands, making the recent midscale conversion launches at Hilton (Spark), Marriott (Four Points Express), Accor (Handwritten) and IHG (Garner) look very well timed.
UBS thinks Choice Hotels (CHH) went public now to compel Wyndham Hotels & Resorts (WH) to continue discussions.
Hilton Worldwide (HLT), Hyatt Hotels Worldwide (HLT), Marriott International (MAR), and Intercontinental Hotels Group (IHG) all poked small gains on Tuesday.
Shares of Wyndham Hotels & Resorts (WH) slipped 0.73% on Tuesday after gaining 8.96% on Tuesday.
