MARYLAND: Choice Hotels, one of the largest owners of budget hotels, has announced a $7.8 billion offer for its rival Wyndham Hotels & Resorts, after Wyndham stopped engaging in private talks about a potential merger.
Choice Hotels said it first approached Wyndham in April with a proposal to combine the two companies, which was reported by the Wall Street Journal in May. The discussions continued until recently, when Wyndham decided to walk away.
Choice said it is offering $90.00 per share for Wyndham, consisting of $49.50 in cash and the rest in stock. The offer represents a 30% premium over Wyndham’s closing price of $69.10 on Monday.
Choice’s stock fell more than 2% to $122.00 in premarket trading on Tuesday, while Wyndham’s stock jumped about 15%.
“We were close to reaching an agreement on price and terms with Wyndham, and we both recognized the value of this transaction for our shareholders, employees, and customers,” Choice CEO Pat Pacious said. “We were surprised and disappointed that Wyndham decided to disengage.”
The hotel industry is experiencing a strong recovery in demand as Americans resume traveling after the pandemic. Choice and Wyndham mainly serve budget-conscious travelers with brands such as Quality Inn, Econo Lodge, Travelodge, and Days Inn.
Choice has also expressed its interest in expanding into the upper-midscale and upscale segments, which Wyndham can offer with brands such as La Quinta.
A merger of Choice and Wyndham would create a larger competitor for Marriott and Hilton, which dominate the higher-end segments of the lodging market.