TWO PROMINENT AAHOA members recently came out in support of Choice Hotels International’s continuing efforts to merge with Wyndham Hotels & Resorts, including one who is among Choice’s nominations for Wyndham’s board of directors. However, AAHOA said it remains concerned about the impact of the deal and released results of a survey of its members that found most opposed the merger.
Since Choice first made its offer for Wyndham public in October after Wyndham’s initial rejection the two companies have traded barbs trying to convince Wyndham shareholders to support or reject the deal. When Choice earlier this week named its eight nominees for Wyndham’s board, among them was Jay Shah, executive chairman at Hersha Hospitality Trust. While Hersha has not replied to two efforts to solicit a comment from Shah about his opinion on Choice’s offer, the candidates are expected to support it if elected in Wyndham’s 2024 shareholder meeting.
Also, in an article in Reuters about the takeover attempt, Mike Leven, who co-founded AAHOA, spoke in favor of the deal.
"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," Leven said.
Not the official position
AAHOA leadership, however, released a statement distancing itself from Shah and Leven’s endorsements of the deal.
"While we respect opinions and viewpoints from every side of the issue, the individuals nominated by Choice Hotels and quoted by Reuters do not speak for AAHOA, and they do not represent AAHOA’s viewpoint,” said Laura Lee Blake, AAHOA president and CEO. “AAHOA remains highly concerned about the significant impact this proposed merger will have on the industry, and we strive to always represent the best interests of our members.”
Blake said a survey of AAHOA members who are Choice and Wyndham franchisees found most had concerns that a hostile takeover would “limit competitiveness, dilute the merged brands in this segment, and decrease the value offered to guests.” Those members make up roughly two-thirds of all Wyndham and Choice franchise hotels, with brands primarily in the economy and mid-scale segments.
The survey found that nearly 80 percent of respondents said that a merger would have a negative impact on their businesses. Also, 70 percent said that it is unlikely, or very unlikely, they would consider being a franchisee if the Choice takeover occurs.
“AAHOA remains resolute in highlighting these grave concerns of its hotelier Franchisee Members, since they are the stakeholders who have the most at stake if a merger were to occur,” Blake said.
The debate continues
Along with Shah, Choice’s nominees are:
Barbara Bennett, founder and principal executive of business consulting firm Bennett West LLC.
Emanuel Pearlman, founder, chairman and CEO of investment management and financial consulting firm Liberation Investment Group.
Fiona Dias, digital commerce consultant who served as the chief strategy officer of online shopping service ShopRunner from 2011 to 2014.
James Nelson, CEO of real estate investment trust Global Net Lease, Inc.
Nana Mensah, founder, chairman and CEO of food packaging and processing equipment exporter ‘XPORTS Inc.
Susan Schnabel, founder and co-managing partner of buyout fund advisor aPriori Capital Partners.
William Grounds, principal of his advisory business Burraneer Capital Advisors LLC
“With this slate of independent, highly qualified candidates for election to the Wyndham board, Wyndham shareholders will have an opportunity to be represented by a board that will fulfill its fiduciary duty to act in the shareholders’ best interests and consider any and all paths to create value,” said Patrick Pacious, Choice president and CEO.
Wyndham’s board acknowledged receipt of the list of Choice’s nominees but said it still recommended that shareholders not tender their shares toward the merger.
“This action is yet another attempt by Choice to advance its inadequate and risk-laden hostile exchange offer, which the Wyndham board unanimously determined is not in the best interests of shareholders. Wyndham’s board and management team are executing the company’s strategic plan, which is expected to deliver shareholder value well in excess of Choice’s offer,” the board said. “Choice’s proxy contest is a blatant scheme to mislead shareholders into packing the Wyndham board with nominees hand-picked to push through their offer.”
In its original proposal, made public in October, Choice said it sought to acquire all the outstanding shares of Wyndham at a price of $90 per share and shareholders would have received $49.50 in cash and 0.324 shares of Choice common stock for each Wyndham share they own. Choice claimed that is a 30 percent premium to Wyndham’s 30-day volume-weighted average closing price ending on Oct. 16, an 11 percent premium to Wyndham’s 52-week high, and a 30 percent premium to Wyndham’s latest closing price.
Wyndham’s board unanimously rejected Choice’s proposal, calling it unsolicited, “highly conditional” and not in the best interest of shareholders. On Nov. 14, however, Choice sent a letter to the Wyndham board with an “enhanced proposal” intended to address Wyndham’s concerns about clearing federal regulations. On Dec. 12, Choice launched its public exchange offer to acquire Wyndham and on Dec. 19 the Wyndham board officially rejected the offer and urged shareholders not to tender shares for the deal.
