Choice Hotels announced an unsolicited offer to Wyndham’s shareholders on Tuesday (read more here) after negotiations had broken down.
Wyndham later on that day released information on why they refused Choice’s proposal that centered on future growth prospects.
You can access Wyndham here.
READ MORE: Wyndham Rewards Rate & Bonus Points Offers
Wyndham’s Key Points:
- 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
- the consideration mix includes a significant component of Choice stock, which the Board believes is fully valued relative to Choice’s growth prospects, especially when compared to Wyndham
- the offer is opportunistic and undervalues Wyndham’s future growth potential
Wyndham’s Release:
Choice’s Proposal:
Choice Hotels Launches Hostile Bid To Acquire Wyndham For $7.8B
Conclusion
Wyndham claims their stock is essentially undervalued while Choice’s would be at fair value, which doesn’t make sense.
The current stock price of both companies encompasses the market’s view of their future profits discounted to today.
These mergers or acquisitions are not good for the competition or consumers. Still, it is up to the shareholders of Wyndham to decide what is in their best interest going forward, and usually, they tend to choose what makes sense in the short term because the long-term prospects of any business are unclear.