Why Wyndham Hotels & Resorts Shares Are Jumping Today

Choice Hotels International, Inc. CHH proposed acquiring all the outstanding shares of Wyndham Hotels & Resorts, Inc. WH at $90.00 per share, payable in a mix of cash and stock.

The proposal implies a total equity value for Wyndham of approximately $7.8 billion on a fully diluted basis. With the assumption of Wyndham's net debt, the proposed transaction is valued at roughly $9.8 billion.

However, Wyndham has decided to disengage from further discussions with Choice following nearly six months of dialogue. As a result, Choice decided to make its latest proposal public.

According to Choice's proposal, Wyndham shareholders would have received $90.00 per share, comprising $49.50 in cash and 0.324 shares of Choice common stock for each Wyndham share they hold.

Choice's offer also presented a substantial 26% premium compared to Wyndham's 30-day volume-weighted average closing price that concluded on October 16, 2023. 

It also constitutes an 11% premium over Wyndham's 52-week high and an impressive 30% premium in relation to Wyndham's most recent closing price.

Choice Hotels anticipates meaningful annual run-rate synergies, estimated at approximately $150 million, by rationalizing operational redundancies, duplicate public company costs, and topline growth potential.

"A few weeks ago, Choice and Wyndham were in a negotiable range on price and consideration, and both parties have a shared recognition of the value opportunity this potential transaction represents. We were therefore surprised and disappointed that Wyndham decided to disengage. While we would have preferred to continue discussions with Wyndham in private, following their unwillingness to proceed, we feel there is too much value for both companies' franchisees, shareholders, associates, and guests to not continue pursuing this transaction. Importantly, we remain convinced of both the many benefits of the combination and our ability to complete it," said Patrick Pacious, President and Chief Executive Officer of Choice Hotels. 

In April 2023, Choice sent its initial letter to Wyndham regarding a potential transaction, proposing to acquire Wyndham for $80.00 per share, comprising 40% cash and 60% Choice stock. 

"Wyndham legacy shareholders stand to benefit from over $500 million of value creation from the realization of cost synergies, in addition to the compelling premium offered and participation in the multiple expansion of the Wyndham business," mentioned Choice's most recent letter sent to Wyndham's Board of Directors, dated August 21, 2023. 

Price Action: WH shares are trading higher by 12.66% to $77.85, while CHH shares are trading lower by 6.33% to $117.00 in premarket on the last check Tuesday.

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