The company’s stock was up about 22% before the bell. The deal would merge Choice Hotels’ brands, such as Econo Lodge and Quality Inn, with Wyndham’s brand names, including Days Inn and Travelodge. Combining the two companies could be a powerful player in the budget lodging sector.
Wyndham Hotels and Resorts is a global vacation ownership and management company that operates or franchises more than 8,100 hotels worldwide, including Days Inn, Howard Johnson’s, Travelodge, and Baymont Inn and Suites. The Parsippany, New Jersey-based company also operates timeshare programs through Wyndham Extra Holidays and RCI, the world’s largest exchange service.
Choice’s offer of $80 per share is a roughly 30% premium to Wyndham’s last closing price and comes after on-and-off discussions between the two companies. The transaction will require approval from Wyndham’s shareholders and is expected to be completed by early 2022.
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“At this stage in the cycle, we’re focused on enhancing shareholder value through strategic transactions,” Wyndham President and CEO Michael D. Brown said. “We believe this is the right time for us to become one of the nation’s leading budget hospitality companies.”
Reuters reported in May that Choice was interested in buying Wyndham Hotels and Resorts, creating a U.S. budget hotel giant with 24 brands and operating in more than 100 countries and territories. The companies’ combined market capitalization would be about $6.29 billion, with Choice’s market cap ahead of Wyndham’s at $5.82 billion as of Monday’s close.
In addition to securing a larger footprint, the merger with Wyndham could help Choice Hotels International reduce its debt burden and unlock additional cost synergies, Reuters reported. The company has identified over $80 million in annual recurring savings from previous acquisitions.
Demand for affordable hotels such as Choice and Wyndham is rising as persistently high inflation and fears of a recession sap consumer spending on travel. While overall hotel occupancies tend to decline during recessions, extended-stay hotels are typically less affected because they attract workers on training stints, construction crews, and people between jobs or caring for sick relatives, Choice’s Pacious says. As a result, he believes such properties can weather the next economic downturn better than other types of hotels. According to Reuters ‘ calculations, a combined Choice and Wyndham could generate more than $700 million in annual recurring earnings from synergies by the end of 2022.
