The Downfall of Choice Hotels International’s Hostile Takeover Attempt of Wyndham Hotels & Resorts

Choice Hotels International recently made the decision to abandon its hostile takeover attempt of Wyndham Hotels & Resorts. This decision was largely based on the lack of support from Wyndham shareholders. Despite a significant number of investors expressing interest in the exchange offer, Choice Hotels International concluded that there was not enough support to proceed with the transaction at this time. This ultimately led to the company withdrawing its nomination of director candidates for election at Wyndham’s 2024 annual meeting of stockholders.

The pursuit of Wyndham Hotels & Resorts by Choice Hotels International dates back to last October, with initial talks between the two companies reportedly taking place as early as April 2023. However, repeated rejections from Wyndham’s leadership eventually pushed Choice Hotels International to launch a hostile takeover effort in December. Despite offering approximately $8 billion for Wyndham, Choice Hotels International’s bid was deemed inadequate by Wyndham’s board of directors. The board argued that Choice Hotels International failed to acknowledge significant regulatory and business risks, as well as Wyndham’s superior growth prospects as a standalone entity.

In addition to shareholder concerns, Choice Hotels International also faced pushback from the franchisee community, particularly the American Hotel Owners Association (AAHOA). The AAHOA strongly opposed the potential merger between Choice Hotels International and Wyndham Hotels & Resorts, citing concerns that a combined company would dominate the economy/limited service segment, limiting options for hotel franchisees. The AAHOA’s membership base, consisting of around 20,000 hotel owners who collectively own 60% of hotels in the U.S., expressed fears about the impact a merger could have on their businesses.

Overall, Choice Hotels International’s failed hostile takeover attempt of Wyndham Hotels & Resorts serves as a cautionary tale of the complexities involved in corporate acquisitions. From shareholder buy-in to regulatory considerations and franchisee opposition, there are numerous factors that can derail such endeavors. In this case, Choice Hotels International ultimately had to concede defeat and withdraw its bid, highlighting the importance of thorough due diligence and strategic planning in pursuing corporate mergers and acquisitions.