Filed by Choice Hotels International, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Wyndham Hotels & Resorts, Inc.
(Commission File No. 001-38432)
Choice Hotels International, Inc. (“Choice”) is using or making available the following communications through the website www.CreateValueWithChoice.com (the “microsite”), a website maintained by Choice providing information relating to the proposal Choice has made to acquire Wyndham Hotels & Resorts, Inc.:
Exhibit 1
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Exhibit 1.1
Reuters
Choice Hotels nominates board directors in hostile Wyndham bid
By Anirban Sen
22 January 2024
Choice Hotels International (CHH.N) pressed ahead with its $8 billion hostile bid for Wyndham Hotels & Resorts (WH.N), on Monday by nominating a slate of directors to replace Wyndham’s eight-member board.
It is Choice’s latest attempt to break a stalemate after trying for most of the last year to negotiate a deal with Wyndham, which has rebuffed the bid as low-premium and fraught with antitrust risk. Wyndham has also raised concerns about the combined company carrying too much debt and a slowdown in Choice’s business.
Choice said its slate of nominees includes hospitality industry veteran Jay Shah, who currently serves on the board of private equity-backed HHM Hotels; Susan Schnabel, founder of aPriori Capital Partners which advises private equity on leveraged buyouts; James Nelson, CEO of real estate investment trust Global Net Lease (GNL.N); and Fiona Dias, who served on Choice’s board from 2004 to 2012.
“The current Wyndham board continues to refuse to engage in meaningful negotiations regarding a combination with Choice that would create extraordinary value. By supporting these nominees and participating in our exchange offer, Wyndham shareholders can send a clear message to the Wyndham board,” said Patrick Pacious, CEO of Choice.
Choice’s board nominees also include Barbara Bennett, founder of consulting firm Bennett West and a former Discovery Communications executive; Emanuel Pearlman, who serves on several public-company boards including Diebold Nixdorf (DBD.N), and Network-1 Technologies (NTIP.A); Nana Mensah, who serves on the board of Darden Restaurants (DRI.N), that operates brands such as Olive Garden and Longhorn Steakhouse; and William Grounds, a veteran of the real estate and hospitality industries, who serves on the board of PointsBet Holdings (PBH.AX).
Reuters first reported about the slate of nominees earlier on Monday and was also first to report on Nov. 27 that Choice was preparing to nominate directors to the board of Wyndham. The move gives Wyndham shareholders a way to push for the deal by turning the vote on board directors in the spring into a referendum on whether the company should open negotiations with Choice.
Last month, Choice unveiled an exchange offer for Wyndham’s stock, appealing directly to its shareholders, after disclosing a stake worth more than $110 million. While that offer cannot become effective—even if a majority of Wyndham shareholders take it up—without the backing of Wyndham’s board, it is aimed at adding to pressure on Wyndham to engage.
In a statement on Monday, Wyndham said it would evaluate Choice’s nominees and make a formal recommendation to Wyndham shareholders in due course, adding that the company remains open to negotiating a proposal that addresses all its concerns about a tie-up between the two sides.
HIGH-STAKES BATTLE
Rockville, Maryland-based Choice operates nearly 7,500 hotels in 46 countries in the upper-midscale and upscale segments, including brands such as Radisson, Country Inn & Suites, and Cambria Hotels.
Parsippany, New Jersey-based Wyndham, which franchises about 9,100 hotels across more than 95 countries, operates brands such as Travelodge, Ramada, Days Inn and Microtel.
Choice has said it has made four offers to Wyndham, with its latest cash-and-stock bid currently worth about $87 per share. This represents a 26% premium to Wyndham’s closing share price on Oct. 16, the last trading day before Choice made its offer public.
Wyndham has said it can achieve a higher valuation on its own, projecting compounded annual growth in adjusted earnings before interest, taxes, depreciation and amortization of between 7% to 10% through 2026. It has said that its adjusted EBITDA growth recently reached 6%.
Wyndham has also argued that the combined company would have market share of more than 55% market share in the economy and midscale hotel sectors, triggering a potential 24-month review by antitrust regulators that could result in the deal being shot down. It also says that the potential deal has now attracted scrutiny from four state attorneys general and that some upset franchisees could flee if there was a deal.
Choice has said it is confident it can secure antitrust clearance for the deal, arguing that the two companies together account for only 10% of U.S. room revenue, and has projected that the combined company would generate about $1 billion of free cash flow in 2024, allowing it to quickly pay down debt and invest in its business.
Choice has offered to pay Wyndham a break-up fee of $435 million were regulators to shoot down the deal, as well as a ticking fee payable to Wyndham for every day the deal has not been completed, starting one year after the companies agree a merger. This ticking fee would be worth $38 million per month.
“A deal makes a lot of sense for both Wyndham and Choice from a franchisee perspective and an ownership standpoint. There are lots of financial synergies in this deal—the franchisees are going to get a significant amount of coordination between what can be done with the increase in the revenue capabilities,” said Mike Leven, who co-founded the Asian American Hotel Owners Association (AAHOA).
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Exhibit 1.2
CNN Business
Comfort Inn’s owner doubles down on its hostile takeover bid for the company that owns Days Inn
By Jordan Valinsky
12 December 2023
Choice Hotels, which owns a number of budget lodging brands, including Comfort Inn, is getting more aggressive in its attempt to acquire its rival Wyndham Hotels.
On Tuesday, Choice said it will expand its several monthslong hostile takeover bid of the Days Inn owner by taking its offer directly to shareholders. In October, Choice offered to buy Wyndham’s stock for around $8 billion.
To further pressure Wyndham into accepting the bid, Choice said it plans to nominate a slate of directors to Wyndham’s board.
Choice said in a press release that a merger 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.”
But Wyndham has refused to engage with Choice thus far.
“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,” Choice CEO Patrick Pacious said in a statement.
Shares of Wyndham (WH) and Choice (CHH) were flat in early trading.
Choice first approached Wyndham with the bid in April with a cash and stock offer and has made numerous bids since. Most recently in October, Wyndham rejected and blasted Choice’s bid as “underwhelming” and “opportunistic” because it “undervalues Wyndham’s future growth potential.”
Pacious said the company will meet with Wyndham’s shareholders “in the days and weeks ahead.”
Wyndham commented that it will “carefully review and evaluate the offer to determine the course of action that it believes is in the best interests of Wyndham and its shareholders.”
Both hotel companies target budget-minded travelers, with the duo owning a number of well-known brands. Choice also owns Econo Lodge, Sleep Inn and Rodeway Inn amounting to about 7,000 hotels worldwide. Wyndham owns several brands including its namesake hotel brand as well as Days Inn and Super 8, amounting to about 9,000 hotels globally.
If a deal is reached, the merger still needs regulatory approval. A combined company could help it compete against its larger rivals, like Hilton and Marriott.
Exhibit 1.3
The Points Guy
Choice Hotels officially goes hostile in Wyndham takeover attempt
By Cameron Sperance
12 December 2023
The budget hotel brouhaha boiled over Tuesday morning as Choice Hotels launched a hostile bid for Wyndham Hotels & Resorts.
Choice, the owner of brands like Comfort Inn and Radisson’s Americas operation, launched a $7.8 billion offer for Wyndham earlier this year. But Wyndham repeatedly rebuffed Choice’s advances. Wyndham owns a variety of budget brands like Days Inn and Super 8 but also higher-end options like the Registry Collection, Wyndham Grand and the Alltra all-inclusive resort brand.
It appears Choice is done playing nice and is now going the hostile route, planning on appealing directly to Wyndham shareholders.
“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,” Choice CEO Patrick Pacious said in a statement. “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.”
Wyndham leadership has portrayed any Choice takeover as too drawn out, peppered with risk and too much of a lowball offer. That sentiment continued later Tuesday.
Wyndham noted it would “carefully review and evaluate the offer to determine the course of action that it believes is in the best interests of Wyndham and its shareholders” but that “the offer looks to be unchanged from Choice’s previous highly conditional offer the Board reviewed and rejected, which failed to address the serious concerns repeatedly expressed by Wyndham.”
Why is everyone so hot for Wyndham?
Choice Hotels leadership previously indicated talks with Wyndham took place over six months earlier in the year before breaking down. Depending on who you talk to, there could be other suitors out there, like financial firm Blackstone.
The budget hotel segment is widely seen as the future of the industry, both in terms of where a bulk of development and guest demand will come from. Hilton’s new premium economy Spark brand is slated to grow on the premise of owners of existing hotels converting to that brand. The first Spark hotel was previously associated with a Wyndham brand, and it’s highly likely the brand will continue to feed off existing Wyndham and Choice hotels.
Marriott entered the space with its acquisition of Mexico-based City Express and the launch of Four Points Express by Sheraton overseas. Hyatt is similarly entering a more affordable segment of the market with its Hyatt Studios extended-stay brand.
There was chatter in the hotel industry that IHG Hotels & Resorts might also be interested in Wyndham, but that would go against IHG’s recent focus on the luxury and lifestyle segment of the market with its expansion of brands like Regent and Six Senses. IHG has previously been mentioned in rumored mergers with Accor and was reported as the original buyer for Starwood before Marriott swooped in at the end of 2015.
Today, Holiday Inn Express is seen as IHG’s affordable brand cash cow, so it’s unlikely a company like that would want to saddle its portfolio with more budget brands.
Why you should care
Owning a budget brand, if not several, is a must these days to cater to travelers for a variety of reasons. At a time when the cost of living is high, it makes sense to have lower-cost options so as to not drive any business away.
Further, it’s a smart way to bring younger travelers into a loyalty program ecosystem. Have them when they can afford a Spark or a Four Points Express, and you’ll keep them all the way to when they’re able to pay for Waldorf Astoria or St. Regis.
A Choice-Wyndham marriage makes sense as far as offering a compelling low-cost juggernaut against Marriott, Hilton and IHG. At the end of the day, there is a sizable segment of the traveling public that just wants an affordable place to stay and doesn’t care about the bells and whistles of a loyalty program.
It’s now just a matter of whether the hostility abates and Wyndham eventually walks down the aisle — or if it becomes a runaway bride.
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