[1/2]The Choice Hotels company logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) on February 17, 2017 in New York, USA.Reuters/Brendan McDiarmid/File photo Obtaining license rights
Nov 27 (Reuters) – Choice Hotels International (CHH.N) is adding directors to the board of rival Wyndham Hotels & Resorts (WH.N) as it seeks to break an impasse in its $8 billion takeover battle. Officials have announced that preparations are underway to appoint a person. The matter was said.
Choice will buy up shares in the open market to become a Wyndham shareholder and plans to raise its stake within the next few days, the people said.
The deal gives Choice the right to nominate directors to Wyndham’s board in January. If Wyndham continues to reject Choice’s takeover bid, Choice could turn the board election at Wyndham’s annual shareholder meeting this spring into a referendum for investors on whether to negotiate, sources said. That’s what it means.
Choice has begun interviewing potential director candidates, the people added. The company is also preparing to launch a tender offer for Wyndham stock to signal to Wyndham investors that it has a firm offer, the people said.
A partnership between the two companies would bring together two of the largest budget hotel operators in the United States.
Sources said Choice is preparing because Wyndham has repeatedly rejected offers and both sides have refused to release their books to allow mutual due diligence. Choice could drop those plans if Wyndham decides to negotiate a deal, the people added, asking not to be identified because the matter is confidential.
Sources said Wyndham is willing to work with Choice and is willing to sign a confidential agreement once all concerns about a potential deal are resolved.
Parsippany, New Jersey-based Wyndham, which operates brands such as Ramada, Super 8 and Microtel, argued last week that Choice’s latest revised bid continues to undervalue its business. The company said it was concerned about Choice’s slowing business growth prospects and that the combined company would take on significant debt.
Wyndham, which franchises about 9,100 hotels in more than 95 countries, cited antitrust scrutiny from U.S. regulators as one reason for rejecting Choice.
Meanwhile, Choice expects the combined company to generate approximately $1 billion in free cash flow in 2024, which it says will allow it to quickly pay down debt and invest in growth.
Rockville, Maryland-based Choice operates approximately 7,500 hotels in 46 countries, including brands such as Radisson, Country Inn & Suites and Cambria Hotels.
Both Choice and Wyndham declined to comment.
Choice went public last month, offering Wyndham $90 a share in cash and stock after Wyndham privately rejected a takeover attempt. Choice first approached Wyndham with an offer of $80 per share in April.
Wyndham, whose stock price is currently hovering around $78, does not view Choice’s stock as attractive currency and is seeking a takeover offer with a higher cash component, according to people familiar with the matter. Based on Choice’s latest stock price, the company’s offer price is valued at approximately $86 per Windham’s share.
In a letter to Wyndham on Nov. 14, Choice CEO Pat Pashas outlined a two-year timeframe for obtaining the necessary regulatory approvals and said the latest proposal It said it included a 6% breakup fee and so-called regulatory “ticking.” The “commission fee” is 0.5% of the offer price. Choice also argues that the merger will not result in higher prices for consumers because hotel franchisees have full autonomy to set their own prices.
Wyndham chairman Stephen Holmes dismissed the letter as a “setback.” He said the two-year approval process would leave the company in limbo, but the breakup fee would not make up for it.
Report by Anirban Sen in New York.Editing: Jonathan Oatis
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