WYNDHAM WORLDWIDE CORP. has signed an agreement to acquire La Quinta Holdings Inc. for nearly $2 billion in cash, the companies announced today.
The deal, expected to close in the spring, will significantly increase Wyndham Hotel Group’s midscale and upper-midscale franchising footprint in the U.S., adding more than 900 franchised hotels to its portfolio.
Wyndham is acquiring La Quinta’s franchising and management business. La Quinta’s 300 owned hotels will be spun off into a separate publicly traded company to be called CorePoint Lodging Inc. Keith Cline, CEO of La Quinta Holdings, will lead the REIT, which will become the largest franchiser of La Quinta hotels.
The transaction also will absorb one of the few remaining single-branded hotel companies operating in the U.S. into a behemoth global entity which will grow to 21 brands and more than 8,500 hotels when the transaction closes in the spring.
A significant number of La Quinta’s franchisees are Asian American hoteliers, who dominate the ownership of midscale, limited-service hotels in the U.S. The hotelier community also comprises the majority of franchisees of Wyndham Hotel Group’s economy and midscale brands.
Wyndham Worldwide plans to separate Wyndham Hotel Group as a pure-play company with Geoff Ballotti remaining as president and CEO.
“La Quinta will immediately become one of our flagship brands,” said Ballotti in a statement. “It is an exceptionally strong brand that is led by service-minded associates who deliver some of the highest customer engagement levels in our industry. We expect that La Quinta guests and franchisees will benefit from our intense focus on product quality and our best-in-class technology, digital, loyalty and distribution platforms. This acquisition also significantly expands our hotel management business and provides us with substantial new opportunities to drive increased growth in our business.”
“As we anticipated, the separation of our businesses is enabling greater strategic clarity and allowing our company to take advantage of growth opportunities that naturally flow from each business model,” Cline said in the announcement. “We believe that, under the management of Wyndham’s seasoned team of executives, the La Quinta portfolio will grow and thrive, yielding long-term benefits to the stakeholders of both companies.”
The boards of directors of both companies have approved the deal. Under the terms of the agreement, stockholders of La Quinta will receive $8.40 per share in cash (approximately $1 billion in aggregate). Wyndham Worldwide will repay approximately $715 million of La Quinta debt net of cash and set aside a reserve of $240 million for estimated taxes expected to be incurred in connection with the taxable spin-off of La Quinta’s owned real estate assets into CorePoint Lodging Inc.
The La Quinta Returns loyalty program, with its 13 million enrolled members, will be combined with Wyndham Rewards program, which has 53 million enrolled members.