PARSIPPANY, N.J. – Wyndham Accommodations & Resorts (NYSE: WH) (“Wyndham” or the “Firm”), the world’s largest lodge franchising firm with roughly 9,100 motels spanning greater than 95 nations, at present introduced that its Board of Administrators obtained a letter from Alternative Accommodations Worldwide, Inc. (NYSE: CHH) (“Alternative”), on November 14, 2023. Wyndham’s Board of Administrators, along with its monetary and authorized advisors, carefully reviewed Alternative’s letter and decided that it represents a step backwards and that the phrases Alternative outlined aren’t in the very best pursuits of Wyndham or its shareholders. Wyndham responded to Alternative in a letter dated November 21, 2023, included under.
Alternative’s first communication in a month since its public disclosure of its unsolicited proposal accommodates no change to the type of consideration and continues to undervalue Wyndham’s standalone progress prospects. At Alternative’s present share value, its supply to accumulate all excellent shares of Wyndham stands at a worth of $86 per share[1], under the nominal worth of $90 per share proposed on October 17, 2023, the date of Alternative’s public disclosure. The letter proposes a two-year interval for Alternative to hunt to acquire regulatory approvals supported solely by a low 6% reverse termination charge, which might each create a protracted interval of limbo and expose Wyndham and its shareholders to vital asymmetrical danger.
Stephen P. Holmes, Chairman of the Wyndham Board of Administrators, mentioned, Alternative continues to disregard our main considerations round worth, consideration combine, and asymmetrical danger to our shareholders given the uncertainty round regulatory timeline and final result. As well as, Alternative’s current proposal is valued at $86 per share, decrease than the unsolicited public proposal of $90 per share they made a month in the past. Given they now explicitly acknowledge the legit points across the regulatory timeline, they’re basically asking our shareholders to tackle critical danger and settle for as compensation for a failed deal a low reverse termination charge that does not even start to compensate for the potential misplaced earnings and long-term impairment to worth that might happen throughout an unsure two-year regulatory evaluate. Consistent with our fiduciary duties, we’ll in fact at all times consider any critical proposal, however Alternative continues to fail to adequately tackle any of the three core points we’ve repeatedly raised. They’ve as a substitute chosen to delay this for months with a proposal that continues to be unfeasible, damaging to our enterprise, and unnecessarily distracting to our administration workforce.
[1] Displays worth as of 11/20/2023, assuming $49.50 in money and 0.324 Alternative shares for every Wyndham share
The next is the complete textual content of Wyndham’s letter to Alternative on November 21, 2023, in response to Alternative’s letter
Pricey Stewart,
We obtained Pat Pacious’ letter of November 14 and shared it with our Board of Administrators who mentioned it at a particular assembly.
When you characterize the letter as your fifth, the actual query is whether or not the letter advances the dialogue. Sadly, this letter doesn’t, and actually represents a step backwards regardless of being delivered almost a full month after you determined to unilaterally go public together with your unsolicited proposal.
Now we have repeatedly articulated three major considerations: (1) undervaluation of our superior, standalone progress prospects, (2) the worth of Alternative shares relative to its progress prospects and additional compromised by elevated ranges of leverage that this deal would require, and (3) the unsure regulatory timeline and final result and ensuing vital asymmetrical danger to our shareholders.
Sadly, regardless of your assertion on the contrary, your letter fails to adequately tackle any of those considerations and subsequently a mixture on the phrases you intend continues to not be in the very best curiosity of Wyndham or its shareholders.
As to the primary and second considerations, they aren’t even talked about in your letter, not to mention solved, regardless of your public feedback that you simply have been ready to handle them with out there instruments and our repeated steerage that an all-cash deal would obviate considerations about Alternative’s shares. Additionally, whilst you body your proposal as being $90 per share, it’s really at the moment valued at $86 per share.
With respect to the regulatory points and phrases, we needed to first tackle misrepresentations in your letter, in addition to ones which have been raised in prior conversations:
- Neither we nor our advisors have ever described this transaction as “pro-competitive.”
- Neither we nor our advisors have ever acknowledged that clearance of the transaction is definite.
- Now we have repeatedly expressed our critical considerations and, if something, they’ve solely elevated because you selected to unilaterally go public together with your proposal. The reception from the Wyndham franchisee group has been unenthusiastic to say the least, as evidenced by the vehement opposition from AAHOA, which represents about two-thirds of our respective franchisees.
With respect to the proposed phrases referring to regulatory issues, whilst you have put some particular numbers to prior qualitative statements, they proceed to fall far quick of what’s required to handle the asymmetrical danger to Wyndham shareholders. As a substitute, they symbolize a step backwards in your place.
For the primary 4 months of our interactions, your workforce repeatedly conveyed confidence that the transaction would clear regulatory approvals inside 60 days. Solely after repeated conversations with our advisors did your workforce lastly acknowledge the opportunity of an in-depth evaluate and Second Request. Your stance has clearly shifted as soon as once more on this level: now, you might be proposing a two-year interval so that you can search to acquire regulatory approvals, which isn’t in any respect assured. This considerably exacerbates our considerations concerning the potential substantial harm and disruption to our enterprise throughout this time. As we described in our Investor Presentation on October 26, a protracted interval of limbo exposes Wyndham to significant dangers, together with new enterprise improvement disruption and deterioration in segment-leading retention charges leading to impaired earnings progress, opponents (together with Alternative) capitalizing on franchisee uncertainty, stagnated improvement of our fast-growing ECHO Suites model, and challenges attracting and retaining workforce members, amongst different issues. This vital worth destruction will affect earnings and compound over time, and probably trigger long-term impairment to our buying and selling a number of.
And these considerations aren’t merely theoretical. Since Could, when your curiosity was leaked to the Wall Avenue Journal, your franchise gross sales workforce and govt management have been actively exploiting the uncertainty round Wyndham that you simply created to hunt a aggressive benefit available in the market for franchisees and improvement companions. For instance, your representatives have informed house owners and prospects that completion of the acquisition is a “100% certainty,” in an obvious try and discourage them from doing enterprise with Wyndham. Whereas our best-in-class administration workforce has been working actively to mitigate this menace, this danger would solely develop worse within the occasion of a signed transaction with a attainable two-year timeline.
Whereas your proposal of a 6% reverse termination charge (satirically calculated off the present $86 per share worth of your supply) lastly quantifies your prior public feedback a couple of “market” charge, we’ve constantly informed you that such a charge doesn’t even start to compensate for the harm to our enterprise within the occasion the deal doesn’t shut after an prolonged regulatory evaluate, a priority made even worse by your new proposal for a 24 month drop-dead date. Given your advisor’s current characterization of your confidence degree within the deal closing being “100%”, we’re deeply puzzled by your unwillingness to conform to a sturdy charge that protects us in circumstances that you simply see no likelihood of ever occurring.
Our Board of Administrators stay trustworthy fiduciaries representing the very best pursuits of Wyndham and its shareholders and different stakeholders and stand prepared to guage and have interaction in discussions for those who make a proposal that adequately addresses every of the three vital considerations we’ve raised on a number of events. Given your persistent unwillingness to adequately and promptly tackle the three considerations which have been constantly communicated or to desert your present proposal, we’re compelled to make our response public as we’re not ready to reveal Wyndham’s enterprise to continued uncertainty, from which you profit competitively.
Sincerely,
Stephen P. Holmes
The next is the complete textual content of Alternative’s letter to Wyndham on November 14, 2023
Pricey Administrators:
On behalf of Alternative Accommodations Worldwide, Inc. (“Alternative” or “we”), I’m happy to current you with this enhanced proposal (the “Proposal”) to pursue a enterprise mixture (the “Transaction”) with Wyndham Accommodations & Resorts, Inc. (“Wyndham” or “you”). This fifth letter takes into consideration the suggestions we obtained from you, the market, and our respective shareholders and franchisees. We made a compelling supply to you on October 17, 2023, and are responding to your request for extra readability relating to danger allocation within the context of the regulatory framework. The commercial logic of the Transaction is irrefutable, and as already mentioned amongst principals and authorized advisors over the previous few months, this transaction is pro-competitive and the required regulatory approvals are obtainable. As well as, our franchisees, lots of whom personal each Wyndham and Alternative manufacturers, have immediately grasped the advantages of this mixture, significantly in mild of rising operational prices. This mixture will drive extra direct bookings, decrease lodge working prices, and create a stronger rewards program. As such, we imagine now could be the proper time to reengage in a direct and personal dialogue with the intention to negotiate a Transaction that’s in the very best curiosity of all our respective stakeholders.
Regulatory Framework:
We’re ready to supply Wyndham vital protections to handle your acknowledged considerations relating to potential regulatory uncertainty, together with:
- Reverse termination charge of $435 million, which represents roughly 6.0% of the entire fairness buy value.
- Whereas we don’t anticipate it will be triggered, a regulatory ticking charge of 0.5% of the entire fairness buy value per 30 days, accruing day by day after the one-year anniversary of the signing of definitive agreements.
- Alternative agrees to take any actions required by antitrust regulators to shut as long as such actions wouldn’t have a fabric adversarial impact on the mixed firm, topic solely to agreeing to an outdoor date 12 months post-signing of a definitive settlement, with two 6-month extensions exercisable by both celebration, if regulatory approvals haven’t been obtained by such date.
- Wyndham’s capability to function within the bizarre course of enterprise in the course of the pendency of the transaction, topic to restricted customary detrimental covenants.
With these protections, we imagine that Alternative’s conviction and dedication to closing the transaction will ship the requisite degree of contractual certainty to your shareholders.
Transaction Worth:
We’re providing $49.50 per share in money and 0.324 shares of Alternative inventory.
- Equates to $90.00 per Wyndham share based mostly on Alternative’s inventory value as of October 16, 2023 (the “Pre-Launch Date”).
- Represents a 31% premium to your unaffected share value on Could 22, 2023 (previous to WSJ leak) and a 24% premium to your share value as of the Pre-Launch Date based mostly on Alternative’s present inventory value, and 37% and 30% premiums, respectively, based mostly on Alternative’s inventory value as of the Pre- Launch Date.
- Maintains the money or inventory election mechanism, topic to a customary proration mechanism.
- Equates to professional forma possession within the mixed firm of 35%.
- Implies a consensus 2023 Adjusted EBITDA a number of of 14.9x based mostly on the Pre-Launch Date worth.
Governance:
We suggest that two mutually acceptable impartial members of the Wyndham board of administrators be a part of the mixed firm board upon the completion of the Transaction, in step with our prior supply.
Data Sharing / NDA:
We’re ready to enter right into a mutual Non-Disclosure Settlement (“NDA”) to offer for direct negotiation of binding agreements in step with this Proposal. We imagine that we may conclude such negotiation, documentation, and confirmatory due diligence inside 20 enterprise days of your good religion engagement with us on the premise of the phrases of this letter. Throughout that point, we might be amenable to a restricted NDA, supplied that:
- The NDA wouldn’t stop the pursuit of an trade supply or proxy contest within the occasion we’re mutually unable to agree on closing phrases.
- We’d be permitted to contact director candidates and put together for, however not launch, a proxy contest or trade supply, with out prior discover.
- No data shared below the NDA can be permitted to be publicly disclosed within the occasion of a public course of.
We imagine that this enhanced Proposal particularly addresses the considerations that you’ve raised up to now and are hopeful that you’ll reengage on the premise of the phrases of this letter.
We look ahead to discussing this Proposal with you.
Greatest regards,
Patrick Pacious
Deutsche Financial institution Securities Inc. and PJT Companions are serving as monetary advisors and Kirkland & Ellis LLP is authorized advisor to Wyndham.
About Wyndham Accommodations & Resorts
Wyndham Accommodations & Resorts (NYSE: WH) is the world’s largest lodge franchising firm by the variety of properties, with roughly 9,100 motels throughout over 95 nations on six continents. By means of its community of roughly 858,000 rooms interesting to the on a regular basis traveler, Wyndham instructions a number one presence within the financial system and midscale segments of the lodging trade. The Firm operates a portfolio of 24 lodge manufacturers, together with Tremendous 8®, Days Inn®, Ramada®, Microtel®, La Quinta®, Baymont®, Wingate®, AmericInn®, Hawthorn Suites®, Trademark Assortment® and Wyndham®. The Firm’s award-winning Wyndham Rewards loyalty program gives roughly 105 million enrolled members the chance to redeem factors at 1000’s of motels, trip membership resorts and trip leases globally. For extra data, go to www.wyndhamhotels.com. The Firm might use its web site as a way of exposing materials personal data and for complying with its disclosure obligations below Regulation FD. Disclosures of this nature will likely be included on the Firm’s web site within the Buyers part, which might at the moment be accessed at https://investor.wyndhamhotels.com. Accordingly, traders ought to monitor this part of the Firm’s web site along with following the Firm’s press releases, filings submitted with the Securities and Change Fee and any public convention calls or webcasts.
Ahead-Trying Statements
This press launch accommodates “forward-looking statements” throughout the that means of federal securities legal guidelines, together with statements associated to our response to Alternative’s most up-to-date letter to our Board. The Firm claims the safety of the Protected Harbor contained within the Personal Securities Litigation Reform Act of 1995 for forward-looking statements. Ahead-looking statements embody those who convey administration’s expectations as to the longer term based mostly on plans, estimates and projections on the time the Firm makes the statements and could also be recognized by phrases corresponding to “will,” “count on,” “imagine,” “plan,” “anticipate,” “intend,” “aim,” “future,” “outlook,” “steerage,” “goal,” “goal,” “estimate,” “projection” and comparable phrases or expressions, together with the detrimental model of such phrases and expressions. Ahead-looking statements contain identified and unknown dangers, uncertainties and different elements, which can trigger the precise outcomes, efficiency or achievements of the Firm to be materially completely different from any future outcomes, efficiency or achievements expressed or implied by such forward-looking statements. You might be cautioned to not place undue reliance on these forward-looking statements, which communicate solely as of the date of this press launch.
Elements that might trigger precise outcomes to vary materially from these within the forward-looking statements embody, with out limitation, basic financial circumstances, together with inflation, larger rates of interest and potential recessionary pressures; the worsening of the consequences from the coronavirus pandemic (“COVID-19”); COVID-19’s scope, length, resurgence and affect on the Firm’s enterprise operations, monetary outcomes, money flows and liquidity, in addition to the affect on the Firm’s franchisees, company and workforce members, the hospitality trade and general demand for and restrictions on journey the Firm’s continued efficiency in the course of the restoration from COVID-19 and any resurgence or mutations of the virus considerations with or threats of different pandemics, contagious illnesses or well being epidemics, together with the consequences of COVID-19; the efficiency of the monetary and credit score markets; the financial surroundings for the hospitality trade; working dangers related to the lodge franchising companies; the Firm’s relationships with franchisees; the affect of battle, terrorist exercise, political instability or political strife, together with the continued battle between Russia and Ukraine; the Firm’s capability to fulfill obligations and agreements below its excellent indebtedness, together with the fee of principal and curiosity and compliance with the covenants thereunder; dangers associated to the Firm’s capability to acquire financing and the phrases of such financing, together with entry to liquidity and capital; and the Firm’s capability to make or pay, plans for and the timing and quantity of any future share repurchases and/or dividends, in addition to the dangers described within the Firm’s most up-to-date Annual Report on Kind 10-Ok filed with the Securities and Change Fee and any subsequent reviews filed with the Securities and Change Fee. The Firm undertakes no obligation to replace or revise any forward-looking statements, whether or not because of new data, subsequent occasions or in any other case, besides as required by regulation.
SOURCE Wyndham Accommodations & Resorts
