©Reuters. FILE PHOTO: A screen displays the logo of Wyndham Hotels & Resorts, Inc. at the New York Stock Exchange (NYSE) in New York City, U.S., June 5, 2023. REUTERS/Brendan McDermid
By Aishwarya Jain
(Reuters) -Choice Hotels International has ended its hostile bid for rival Wyndham Hotels & Resorts (NYSE:) after failing to garner enough support from the target’s shareholders, the company said on Monday.
The company will also withdraw nominations of independent director candidates for election at Wyndham’s 2024 annual meeting.
Wyndham shares fell 4.5% before the bell, while Choice shares rose 3%. Wyndham shares have gained about 10% since the offering was made public in October.
“While the support from Wyndham shareholders who tendered to the exchange offer was significant considering the number of investors structurally unable to participate at this stage, it was not sufficient for Choice to conclude that a path is available at this time towards a settlement,” Choice said. .
Choice, which entered into acquisition talks with Wyndham in April 2023, made public its cash-and-stock offer in October, then valued at about $8 billion, to combine two of the largest budget hotel operators in the United States while travel demand normalizes.
It launched a hostile bid in December after Wyndham repeatedly rebuffed its approaches, saying the offer was low-premium and fraught with antitrust risks. Wyndham also expressed concern that the combined company has too much debt and a slowdown in Choice’s business.
In an effort to break the stalemate, Choice in January appointed a slate of directors to replace Wyndham’s eight board members.
Wyndham said it could earn a higher valuation on its own, forecasting compound annual growth in adjusted earnings before interest, taxes, depreciation and amortization of 7% to 10% through 2026. Adjusted EBITDA growth has reached 6%, the company said recently.
The end of the tender offer could spell upside for Choice, Jefferies analyst David Katz wrote in a note, upgrading the budget hotel operator to “buy” from “underperform.”
“Choice shares now return to solid fundamentals as the risk of a trade is mitigated,” Katz said.
Choice said Monday that its board of directors has authorized an increase of 5 million shares in its repurchase program.