PARSIPPANY, N.J. – Wyndham Inns & Resorts (NYSE: WH) (“Wyndham” or the “Firm”), the world’s largest resort franchising firm with roughly 9,100 inns spanning greater than 95 international locations, at this time introduced that its Board of Administrators obtained a letter from Alternative Inns Worldwide, Inc. (NYSE: CHH) (“Alternative”), on November 14, 2023. Wyndham’s Board of Administrators, along with its monetary and authorized advisors, intently reviewed Alternative’s letter and decided that it represents a step backwards and that the phrases Alternative outlined should not in one of the 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 incorporates no change to the type of consideration and continues to undervalue Wyndham’s standalone development prospects. At Alternative’s present share worth, its supply to accumulate all excellent shares of Wyndham stands at a price 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 payment, which might each create a protracted interval of limbo and expose Wyndham and its shareholders to important asymmetrical threat.
Stephen P. Holmes, Chairman of the Wyndham Board of Administrators, stated, Alternative continues to disregard our main issues round worth, consideration combine, and asymmetrical threat to our shareholders given the uncertainty round regulatory timeline and consequence. As well as, Alternative’s present 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 reliable points across the regulatory timeline, they’re basically asking our shareholders to tackle severe threat and settle for as compensation for a failed deal a low reverse termination payment 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 assessment. Consistent with our fiduciary duties, we are going to in fact all the time consider any severe proposal, however Alternative continues to fail to adequately tackle any of the three core points now we have repeatedly raised. They’ve as a substitute chosen to lengthen this for months with a proposal that is still unfeasible, damaging to our enterprise, and unnecessarily distracting to our administration crew.
[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
Expensive Stewart,
We obtained Pat Pacious’ letter of November 14 and shared it with our Board of Administrators who mentioned it at a particular assembly.
Whilst 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 in reality represents a step backwards regardless of being delivered practically a full month after you determined to unilaterally go public along with your unsolicited proposal.
We have now repeatedly articulated three main issues: (1) undervaluation of our superior, standalone development prospects, (2) the worth of Alternative shares relative to its development prospects and additional compromised by elevated ranges of leverage that this deal would require, and (3) the unsure regulatory timeline and consequence and ensuing important asymmetrical threat to our shareholders.
Sadly, regardless of your assertion on the contrary, your letter fails to adequately tackle any of those issues and due to this fact a mix on the phrases you plan continues to not be in one of the best curiosity of Wyndham or its shareholders.
As to the primary and second issues, they aren’t even talked about in your letter, not to mention solved, regardless of your public feedback that you simply had been ready to handle them with out there instruments and our repeated steerage that an all-cash deal would obviate issues about Alternative’s shares. Additionally, whilst you body your proposal as being $90 per share, it’s truly 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 for certain.
- We have now repeatedly expressed our severe issues and, if something, they’ve solely elevated because you selected to unilaterally go public along 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 regarding regulatory issues, whilst you have put some particular numbers to prior qualitative statements, they proceed to fall far brief of what’s required to handle the asymmetrical threat to Wyndham shareholders. As an alternative, they characterize a step backwards in your place.
For the primary 4 months of our interactions, your crew repeatedly conveyed confidence that the transaction would clear regulatory approvals inside 60 days. Solely after repeated conversations with our advisors did your crew lastly acknowledge the potential for an in-depth assessment 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 issues in regards to 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 development, rivals (together with Alternative) capitalizing on franchisee uncertainty, stagnated improvement of our fast-growing ECHO Suites model, and challenges attracting and retaining crew members, amongst different issues. This important worth destruction will influence earnings and compound over time, and probably trigger long-term impairment to our buying and selling a number of.
And these issues should not merely theoretical. Since Might, when your curiosity was leaked to the Wall Avenue Journal, your franchise gross sales crew and government 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 instructed house owners and prospects that completion of the acquisition is a “100% certainty,” in an obvious try to discourage them from doing enterprise with Wyndham. Whereas our best-in-class administration crew has been working actively to mitigate this risk, this threat would solely develop worse within the occasion of a signed transaction with a doable two-year timeline.
Whereas your proposal of a 6% reverse termination payment (sarcastically calculated off the present $86 per share worth of your supply) lastly quantifies your prior public feedback a few “market” payment, now we have constantly instructed you that such a payment doesn’t even start to compensate for the harm to our enterprise within the occasion the deal doesn’t shut after an prolonged regulatory assessment, a priority made even worse by your new proposal for a 24 month drop-dead date. Given your advisor’s latest characterization of your confidence degree within the deal closing being “100%”, we’re deeply puzzled by your unwillingness to conform to a strong payment that protects us in circumstances that you simply see no likelihood of ever occurring.
Our Board of Administrators stay devoted fiduciaries representing one of the best pursuits of Wyndham and its shareholders and different stakeholders and stand prepared to judge and interact in discussions for those who make a proposal that adequately addresses every of the three important issues now we have raised on a number of events. Given your persistent unwillingness to adequately and promptly tackle the three issues which have been constantly communicated or to desert your present proposal, we’re compelled to make our response public as we aren’t 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
Expensive Administrators:
On behalf of Alternative Inns 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 Inns & 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 concerning threat 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 mix, significantly in gentle of rising operational prices. This mixture will drive extra direct bookings, decrease resort working prices, and create a stronger rewards program. As such, we consider now could be the fitting time to reengage in a direct and personal dialogue to be able to negotiate a Transaction that’s in one of the best curiosity of all our respective stakeholders.
Regulatory Framework:
We’re ready to supply Wyndham important protections to handle your acknowledged issues concerning potential regulatory uncertainty, together with:
- Reverse termination payment of $435 million, which represents roughly 6.0% of the entire fairness buy worth.
- Whereas we don’t anticipate it could be triggered, a regulatory ticking payment of 0.5% of the entire fairness buy worth monthly, 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 out of doors 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 capacity to function within the abnormal course of enterprise in the course of the pendency of the transaction, topic to restricted customary unfavorable covenants.
With these protections, we consider 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 primarily based on Alternative’s inventory worth as of October 16, 2023 (the “Pre-Launch Date”).
- Represents a 31% premium to your unaffected share worth on Might 22, 2023 (previous to WSJ leak) and a 24% premium to your share worth as of the Pre-Launch Date primarily based on Alternative’s present inventory worth, and 37% and 30% premiums, respectively, primarily based on Alternative’s inventory worth 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 primarily based on the Pre-Launch Date worth.
Governance:
We suggest that two mutually acceptable unbiased members of the Wyndham board of administrators be a part of the mixed firm board upon the completion of the Transaction, according to our prior supply.
Data Sharing / NDA:
We’re ready to enter right into a mutual Non-Disclosure Settlement (“NDA”) to supply for direct negotiation of binding agreements according to this Proposal. We consider that we might conclude such negotiation, documentation, and confirmatory due diligence inside 20 enterprise days of your good religion engagement with us on the idea 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 change supply or proxy contest within the occasion we’re mutually unable to agree on closing phrases.
- We might be permitted to contact director candidates and put together for, however not launch, a proxy contest or change supply, with out prior discover.
- No info shared beneath the NDA could be permitted to be publicly disclosed within the occasion of a public course of.
We consider that this enhanced Proposal particularly addresses the issues that you’ve got raised so far and are hopeful that you’ll reengage on the idea of the phrases of this letter.
We stay up for 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 Inns & Resorts
Wyndham Inns & Resorts (NYSE: WH) is the world’s largest resort franchising firm by the variety of properties, with roughly 9,100 inns throughout over 95 international locations on six continents. By way of its community of roughly 858,000 rooms interesting to the on a regular basis traveler, Wyndham instructions a number one presence within the economic system and midscale segments of the lodging trade. The Firm operates a portfolio of 24 resort 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 provides roughly 105 million enrolled members the chance to redeem factors at 1000’s of inns, trip membership resorts and trip leases globally. For extra info, go to www.wyndhamhotels.com. The Firm might use its web site as a way of exposing materials private info and for complying with its disclosure obligations beneath Regulation FD. Disclosures of this nature might be included on the Firm’s web site within the Traders 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 Trade Fee and any public convention calls or webcasts.
Ahead-Trying Statements
This press launch incorporates “forward-looking statements” throughout the which 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 Secure Harbor contained within the Non-public Securities Litigation Reform Act of 1995 for forward-looking statements. Ahead-looking statements embrace people who convey administration’s expectations as to the longer term primarily based on plans, estimates and projections on the time the Firm makes the statements and could also be recognized by phrases comparable to “will,” “count on,” “consider,” “plan,” “anticipate,” “intend,” “objective,” “future,” “outlook,” “steerage,” “goal,” “goal,” “estimate,” “projection” and comparable phrases or expressions, together with the unfavorable model of such phrases and expressions. Ahead-looking statements contain recognized and unknown dangers, uncertainties and different components, 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’re 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 embrace, with out limitation, normal financial situations, together with inflation, greater rates of interest and potential recessionary pressures; the worsening of the results from the coronavirus pandemic (“COVID-19”); COVID-19’s scope, length, resurgence and influence on the Firm’s enterprise operations, monetary outcomes, money flows and liquidity, in addition to the influence on the Firm’s franchisees, friends and crew members, the hospitality trade and total 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 issues with or threats of different pandemics, contagious ailments or well being epidemics, together with the results of COVID-19; the efficiency of the monetary and credit score markets; the financial atmosphere for the hospitality trade; working dangers related to the resort franchising companies; the Firm’s relationships with franchisees; the influence of warfare, terrorist exercise, political instability or political strife, together with the continuing battle between Russia and Ukraine; the Firm’s capacity to fulfill obligations and agreements beneath its excellent indebtedness, together with the cost of principal and curiosity and compliance with the covenants thereunder; dangers associated to the Firm’s capacity to acquire financing and the phrases of such financing, together with entry to liquidity and capital; and the Firm’s capacity 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 Type 10-Ok filed with the Securities and Trade Fee and any subsequent reviews filed with the Securities and Trade Fee. The Firm undertakes no obligation to replace or revise any forward-looking statements, whether or not because of new info, subsequent occasions or in any other case, besides as required by regulation.
SOURCE Wyndham Inns & Resorts
