Investors reacted positively as Choice Hotels (CHH, Financial) announced the termination of its $8.0 billion hostile takeover attempt of Wyndham Hotels & Resorts (WH, Financial). This decision concludes a nearly year-long pursuit, initially boosting WH's stock with the merger's potential to create one of the largest budget hotel chains in the U.S. since the rumor surfaced in May 2023.
Today, CHH disclosed the cancellation of its bid for WH, including the expiration of its exchange offer and the withdrawal of its independent director nominations. In a strategic shift, CHH has approved a 5.0 million share increase to its existing repurchase program, elevating the total to approximately 6.8 million shares, or about 14% of its outstanding shares. This move coincides with a significant upgrade from Jefferies, elevating CHH to a "Buy" from a previous "Underperform" rating.
CHH's persistent efforts to acquire WH included a formal offer of $90.00 per share in cash and stock in October, which WH rejected. Despite facing resistance from WH and regulatory challenges from the FTC, CHH continued its pursuit by nominating directors for WH and initiating a tender offer for WH shares, ultimately ceasing its efforts today.
With the takeover bid behind it, CHH is now fully focused on its business growth and has reiterated its FY24 strategy, aiming for a roughly 10% increase in adjusted EBITDA.
- CHH has reported a strong quarter, driven by success in its five strategic pillars: generating higher royalties per unit, increasing hotel openings, expanding geographic reach, enhancing platform capabilities, and integrating new businesses.
- With a franchise model, CHH enjoys a stable revenue stream and has been focusing on hotels that generate higher royalties per unit, increasing its mix of upscale and midscale brands to 82% as of Q4 from 74% since FY17.
- The acquisition of Radisson Americas has exceeded expectations, with CHH achieving $85 million in annual recurring synergies during FY23, surpassing its target by over 6%. CHH plans to continue expanding the Radisson Americas portfolio across the U.S., Canada, and Latin America.
Despite abandoning the takeover of WH, CHH remains a strong player in the hotel industry with significant expansion potential. By increasing its upscale room mix and targeting a 10% EBITDA growth, CHH demonstrates its ongoing profitability and growth capabilities, having already expanded its EBITDA by 45% since 2019.
