Discloses Ownership Position of More Than
$110 Million of Wyndham
Stock
Preparing to Nominate Candidates to the
Wyndham Board of Directors
Commences the Regulatory Approval
Process
NORTH
BETHESDA, Md., Dec. 12,
2023 /PRNewswire/ -- Choice Hotels
International, Inc. (NYSE: CHH) (the "Company" or "Choice"), today
announced that it is commencing an exchange offer to acquire
Wyndham Hotels & Resorts, Inc. (NYSE: WH) ("Wyndham") in order
to present its compelling proposal directly to Wyndham
shareholders. Choice continues to believe that a transaction with
Wyndham is pro-competitive and would generate value for both
Wyndham and Choice shareholders as well as deliver significant
benefits to franchisees, guests and associates of both
companies.
Patrick Pacious, President and
Chief Executive Officer of Choice, said, "While we would have
preferred to come to a negotiated agreement, the Wyndham Board's
refusal to explore a transaction has left us with no choice but to
take our proposal directly to Wyndham's shareholders. Wyndham chose
to publicly reject our last proposal without any engagement even
after we addressed their concerns, including adding significant
regulatory protections for their shareholders."
"It remains our goal to reach a mutually agreeable transaction,
and there is potential for additional value to be unlocked if
Wyndham were to return to the negotiating table and provide due
diligence. We look forward to meeting with Wyndham's shareholders
in the days and weeks ahead and to continuing the regulatory
approval process we're starting this week," concluded Pacious.
Choice also announced that it currently holds approximately 1.5
million shares of Wyndham common stock, valued in excess of
$110 million and today is filing the
Hart-Scott-Rodino ("HSR") notification in order to begin the
required regulatory review.
Terms of Exchange Offer
The exchange offer maintains the previously proposed offer to
Wyndham, comprised of $49.50 in cash
and 0.324 shares of Choice common stock per Wyndham share,
representing a value of $40.50 based
on Choice's trading price as of October 16,
2023, the day prior to Choice's first public offer (the
"Pre-Release Date"). As of the Pre-Release Date, the proposed offer
price equates to a 30% premium to Wyndham's closing share price of
$69.10, and reflects a 14.9x multiple
of Wyndham's consensus 2023 adjusted EBITDA estimate, a forward
multiple Wyndham has never achieved, absent COVID disruptions.
The exchange offer provides Wyndham shareholders the opportunity
to elect to receive the consideration in all cash, all shares or a
combination of cash and shares, subject to a customary proration
mechanism. In addition, the exchange offer features a regulatory
ticking fee of $0.45 per Wyndham
share per month, equivalent to $38
million per month, accruing daily after the one-year
anniversary of the date a majority of Wyndham's shares are tendered
into the offer. This additional consideration, which has been
included so that Wyndham shareholders can receive benefits similar
to what Choice previously offered in its November 14, 2023 proposal in the unlikely event
the transaction were to take longer than 12 months to close, would
be payable in cash or stock, at Choice's election, upon Choice's
acceptance and exchange of the Wyndham shares tendered into the
offer.
The exchange offer and withdrawal rights are scheduled to expire
at 5:00 PM, New York City time on Friday March 8, 2024, unless the offer is
extended or terminated. The exchange offer is subject to
conditions, including the receipt of all required regulatory
approvals. In the exchange offer, Choice is committing to take all
actions required by regulators in connection with the approval of
the transaction so long as such actions would not have a material
adverse effect on the combined company. The full terms, conditions
and other details of the exchange offer are set forth in the
offering documents that Choice is filing today with the Securities
and Exchange Commission.
Choice made a proposal privately to Wyndham on November 14, 2023, comprised of $49.50 in cash and 0.324 shares of Choice common
stock per share of Wyndham stock, and offered Wyndham two seats on
the combined company's board.
The November 14,
2023 proposal included certain additional protections for
Wyndham shareholders to provide certainty, as Wyndham publicly
stated they desired, including:
- A reverse termination fee of $435
million, which represents approximately 6.0% of the total
equity purchase price, payable in the event that the transaction
did not close due to the failure to receive the required regulatory
approvals;
- A regulatory ticking fee of 0.5% of the total equity purchase
price per month, accruing daily after the one-year anniversary of
the signing of definitive agreements;
- A mutual non-disclosure agreement to allow the parties to
conduct confirmatory due diligence; and
- A commitment to taking all actions required by regulators in
connection with the approval of the transaction so long as such
actions would not have a material adverse effect on the combined
company.
Instead of discussing the terms of such proposal with Choice,
Wyndham publicly rejected the proposed terms on November 21, 2023.
While not applicable to the exchange offer, in the context of a
negotiated transaction, Choice remains willing to offer Wyndham
shareholders a reverse termination fee that is consistent with the
terms in its November 14, 2023
proposal and two seats on the combined company's board.
Additionally, Choice is willing to enter into a mutual
non-disclosure agreement to conduct confirmatory due diligence that
could potentially unlock additional value for Wyndham
shareholders.
Path Forward and Next Steps
Choice is starting the clock on the regulatory approval process
and is filing notification and report forms under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 with the U.S.
Federal Trade Commission ("FTC") today. Choice has already met with
the FTC on a voluntary basis to discuss the pro-competitive nature
of the transaction and looks forward to continuing to work closely
with the FTC. Choice is committed to completing the transaction
within one year.
Choice is actively identifying, evaluating and interviewing
highly qualified director candidates to nominate to Wyndham's board
and has requested the Directors' & Officers' ("D&O")
Questionnaire from Wyndham in accordance with Wyndham's bylaws.
Choice intends to nominate a slate of directors to the Wyndham
Board of Directors at Wyndham's 2024 Annual Shareholder
Meeting.
Additional materials are available at
CreateValueWithChoice.com.
Advisors
Moelis & Company LLC, Goldman Sachs & Co. LLC and Wells
Fargo are serving as financial advisors to Choice and Willkie Farr & Gallagher LLP and Axinn,
Veltrop & Harkrider LLP are serving as legal advisors.
About Choice Hotels®
Choice Hotels International, Inc. (NYSE: CHH) is one of the
largest lodging franchisors in the world. The challenger in the
upscale segment and a leader in midscale and extended stay, Choice®
has nearly 7,500 hotels, representing almost 630,000 rooms, in 46
countries and territories. A diverse portfolio of 22 brands that
range from full-service upper upscale properties to midscale,
extended stay and economy enables Choice® to meet travelers' needs
in more places and for more occasions while driving more value for
franchise owners and shareholders. The award-winning Choice
Privileges® loyalty program and co-brand credit card options
provide members with a fast and easy way to earn reward nights and
personalized perks. For more information, visit
www.choicehotels.com.
Forward-looking Statements
Information set forth herein includes "forward-looking
statements". Certain, but not necessarily all, of such
forward-looking statements can be identified by the use of
forward-looking terminology, such as "expect," "estimate,"
"believe," "anticipate," "should," "will," "forecast," "plan,"
"project," "assume," or similar words of futurity. All statements
other than historical facts are forward-looking statements. These
forward-looking statements are based on management's current
beliefs, assumptions and expectations regarding future events,
which in turn are based on information currently available to
management. Such statements include, but are not limited to, the
ultimate outcome of any possible transaction between Choice and
Wyndham (including the possibility that the parties will not agree
to pursue a business combination transaction or that the terms of
any definitive agreement will be materially different from those
described herein); uncertainties as to whether Wyndham will
cooperate with Choice regarding the proposed transaction; Choice's
ability to consummate the proposed transaction with Wyndham; the
conditions to the completion of the proposed transaction, including
the receipt of any required shareholder approvals and any required
regulatory approvals; Choice's ability to finance the proposed
transaction with Wyndham; Choice's indebtedness, including the
substantial indebtedness Choice expects to incur in connection with
the proposed transaction with Wyndham and the need to generate
sufficient cash flows to service and repay such debt; the
possibility that Choice may be unable to achieve expected synergies
and operating efficiencies within the expected timeframes or at all
and to successfully integrate Wyndham's operations with those of
Choice, including the Choice loyalty program; the possibility that
Choice may be unable to achieve the benefits of the proposed
transaction for its franchisees, associates, investors and guests
within the expected timeframes or at all, including that such
integration may be more difficult, time-consuming or costly than
expected; that operating costs and business disruption (without
limitation, difficulties in maintaining relationships with
associates, guests or franchisees) may be greater than expected
following the proposed transaction or the public announcement of
the proposed transaction; and that the retention of certain key
employees may be difficult. Such statements may relate to
projections of Choice's revenue, expenses, adjusted EBITDA,
earnings, debt levels, ability to repay outstanding indebtedness,
payment of dividends, repurchases of common stock and other
financial and operational measures, including occupancy and open
hotels, revenue per available room, Choice's ability to benefit
from any rebound in travel demand, and Choice's liquidity, among
other matters. We caution you not to place undue reliance on any
such forward-looking statements. Forward-looking statements do not
guarantee future performance and involve known and unknown risks,
uncertainties and other factors.
These and other risk factors that may affect Choice's operations
are discussed in detail in the applicable company's filings with
the Securities and Exchange Commission, including its Annual Report
on Form 10-K and, as applicable, its or Wyndham's Quarterly Reports
on Form 10-Q. These forward-looking statements speak only as of the
date of this communication or as of the date to which they refer,
and Choice assumes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise, except as required by law.
Non-GAAP Financial Measurements and Other Definitions
Choice evaluates its operations utilizing, among others, the
performance metric adjusted EBITDA, which is a non-GAAP financial
measurement. This measure should not be considered as an
alternative to any measure of performance or liquidity as
promulgated under or authorized by GAAP, such as net income.
Choice's calculation of this measurement may be different from the
calculations used by other companies, including Wyndham, and
comparability may therefore be limited. We discuss management's
reasons for reporting this non-GAAP measure and how it is
calculated below.
In addition to the specific adjustments noted below with respect
to adjusted EBITDA, the non-GAAP measures presented herein also
exclude restructuring of Choice's operations including employee
severance benefit, income taxes and legal costs, acquisition
related due diligence, transition and transaction costs, and
gains/losses on sale/disposal and impairment of assets primarily
related to hotel ownership and development activities to allow for
period-over-period comparison of ongoing core operations before the
impact of these discrete and infrequent charges.
Adjusted Earnings Before Interest, Taxes, Depreciation, and
Amortization: Adjusted EBITDA reflects net income excluding the
impact of interest expense, interest income, provision for income
taxes, depreciation and amortization, franchise-agreement
acquisition cost amortization, other (gains) and losses, equity in
net income (loss) of unconsolidated affiliates, markto-market
adjustments on non-qualified retirement plan investments, share
based compensation expense (benefit) and surplus or deficits
generated by reimbursable revenue from franchised and managed
properties. We consider adjusted EBITDA and adjusted EBITDA margins
to be an indicator of operating performance because it measures our
ability to service debt, fund capital expenditures, and expand our
business. We also use these measures, as do analysts, lenders,
investors, and others, to evaluate companies because it excludes
certain items that can vary widely across industries or among
companies within the same industry. For example, interest expense
can be dependent on a company's capital structure, debt levels, and
credit ratings, and share based compensation expense (benefit) is
dependent on the design of compensation plans in place and the
usage of them. Accordingly, the impact of interest expense and
share based compensation expense (benefit) on earnings can vary
significantly among companies. The tax positions of companies can
also vary because of their differing abilities to take advantage of
tax benefits and because of the tax policies of the jurisdictions
in which they operate. As a result, effective tax rates and
provision for income taxes can vary considerably among companies.
These measures also exclude depreciation and amortization because
companies utilize productive assets of different ages and use
different methods of both acquiring and depreciating productive
assets or amortizing franchise-agreement acquisition costs. These
differences can result in considerable variability in the relative
asset costs and estimated lives and, therefore, the depreciation
and amortization expense among companies. Mark-to-market
adjustments on non-qualified retirement-plan investments recorded
in SG&A are excluded from EBITDA, as Choice accounts for these
investments in accordance with accounting for deferred-compensation
arrangements when investments are held in a rabbi trust and
invested. Changes in the fair value of the investments are
recognized as both compensation expense in SG&A and other gains
and losses. As a result, the changes in the fair value of the
investments do not have a material impact on Choice's net income.
Surpluses and deficits generated from reimbursable revenues from
franchised and managed properties are excluded, as Choice's
franchise and management agreements require these revenues to be
used exclusively for expenses associated with providing franchise
and management services, such as central reservation and
property-management systems, hotel employee and operating costs,
reservation delivery and national marketing and media advertising.
Franchised and managed property owners are required to reimburse
Choice for any deficits generated from these activities and Choice
is required to spend any surpluses generated in future periods.
Since these activities will be managed to break-even over time,
quarterly or annual surpluses and deficits have been excluded from
the measurements utilized to assess Choice's operating
performance.
RevPAR: RevPAR is calculated by dividing hotel room revenue by
the total number of room nights available to guests for a given
period. Management considers RevPAR to be a meaningful indicator of
hotel performance and therefore company royalty and system revenues
as it provides a metric correlated to the two key drivers of
operations at a hotel: occupancy and ADR. Choice calculates RevPAR
based on information as reported by its franchisees. To accurately
reflect RevPAR, Choice may revise its prior years' operating
statistics for the most current information provided. RevPAR is
also a useful indicator in measuring performance over comparable
periods.
Pipeline: Pipeline is defined as hotels awaiting conversion,
under construction or approved for development, and master
development agreements committing owners to future franchise
development.
This communication includes Wall Street consensus projected
results for Choice and Wyndham for future periods. Choice is
including these consensus estimates for informational purposes
only, but is not affirming analyst projections or separately
including guidance on these metrics. Other information regarding
Wyndham has been taken from, or based upon, publicly available
information. Choice does not take any responsibility for the
accuracy or completeness of such information. To date, Choice has
not had access to any non-public information of Wyndham.
Additional Information
This communication relates to a proposal that Choice has made
for a business combination transaction with Wyndham and the
exchange offer which Choice, through WH Acquisition Corp., its
wholly owned subsidiary, has made to Wyndham stockholders. The
exchange offer is being made pursuant to a tender offer statement
on Schedule TO (including the offer to exchange, the letter of
election and transmittal and other related offer documents) and a
registration statement on Form S-4 filed by Choice on December 12, 2023. These materials, as may be
amended from time to time, contain important information, including
the terms and conditions of the offer. In furtherance of this
proposal and subject to future developments, Choice (and, if
applicable, Wyndham) may file one or more registration statements,
proxy statements, tender or exchange offers or other documents with
the Securities and Exchange Commission (the "SEC"). This
communication is not a substitute for any proxy statement,
registration statement, tender or exchange offer document,
prospectus or other document Choice and/or Wyndham may file with
the SEC in connection with the proposed transaction.
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended. Investors and security holders
of Choice and Wyndham are urged to read the proxy statement(s),
registration statement, tender or exchange offer document
(including the offer to exchange, the letter of election and
transmittal and other related offer documents), prospectus and/or
other documents filed with the SEC carefully in their entirety if
and when they become available as they will contain important
information about the proposed transaction. Any definitive proxy
statement(s) or prospectus(es) (if and when available) will be
mailed to shareholders of Choice and/or Wyndham, as applicable.
Investors and security holders may obtain free copies of these
documents (if and when available) and other documents filed with
the SEC by Choice through the web site maintained by the SEC at
www.sec.gov, and by visiting Choice's investor relations site at
www.investor.choicehotels.com.
This communication is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, Choice and its directors and
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. You can find information about
Choice's executive officers and directors in the Annual Report on
Form 10-K for the year ended December 31,
2022 filed by Choice with the SEC on March 1, 2023. Additional information regarding
the interests of such potential participants will be included in
one or more registration statements, proxy statements, tender or
exchange offer documents or other documents filed with the SEC if
and when they become available. These documents (if and when
available) may be obtained free of charge from the SEC's website at
www.sec.gov and by visiting Choice's investor relations site at
www.investor.choicehotels.com.
In this communication, we reference information and statistics
regarding the Travel Industry. We have obtained this information
and statistics from various independent third-party sources,
including independent industry publications, reports by market
research firms and other independent sources, such as Euromonitor
International Limited. Some data and other information contained in
this communication are also based on management's estimates and
calculations, which are derived from our review and interpretation
of internal surveys and independent sources. Data regarding the
industries in which we compete and our market position and market
share within these industries are inherently imprecise and are
subject to significant business, economic and competitive
uncertainties beyond our control, but we believe they generally
indicate size, position and market share within these industries.
While we believe such information is reliable, we have not
independently verified any third-party information. While we
believe our internal company research and estimates are reliable,
such research and estimates have not been verified by any
independent source. In addition, assumptions and estimates of our
and our industries' future performance are necessarily subject to a
high degree of uncertainty and risk due to a variety of factors.
These and other factors could cause our future performance to
differ materially from our assumptions and estimates. As a result,
you should be aware that market, ranking and other similar industry
data including in this communication, and estimates and beliefs
based on that data, may not be reliable. We cannot guarantee the
accuracy or completeness of any such information contained in this
communication.
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SOURCE Choice Hotels International, Inc.