In early 2018, it was well known that Wyndham Worldwide (WYN) was in growth mode and that La Quinta (LQ) was looking for another company to acquire it. And then, in the early hours of Thursday, Jan. 18, news broke that Wyndham had acquired La Quinta as part of a $1.95 billion deal.
Stock in both companies quickly jumped in the wake of the news. La Quinta’s stock rose more than 8%, and Wyndham’s stock bounced more than 2%.
In hindsight, it’s easy to see the signals that connected Wyndham to La Quinta. But it’s far more difficult to see those signals in real-time.
Here’s a rundown of the news and rumors leading up to Wyndham’s acquisition of La Quinta, as well as a closer look at how JetTrack could have helped any analyst connect the two companies ahead of the acquisition.
Mid 2017: La Quinta Splits Company and Looks to Sell
As far back as early 2017, it was clear that La Quinta was shifting the direction of its business.
By May, Reuters was reporting that La Quinta was actively looking to sell its remaining franchise and hotel management business. The moves made perfect sense in the sequence La Quinta was making them. Spinning off the real estate reduced drag on revenue, which might allow the rest of the business to fetch a better price on the open market.
But there was another “sell” signal that savvy investors might uncover. Hilton also executed a spin-off of its real estate assets in 2016. But the passage of the Protecting Americans from Tax Hikes Act had passed since Hilton’s spin-off, which meant La Quinta would pay spin-off-related taxes that Hilton had not.
Without the promise of a future sale, La Quinta’s investors would never have allowed the spin-off and its accompanying tax obligation. It was clear La Quinta would eventually sell. It was only a matter of time and a question of whom would buy the company.
Mid 2017: Wyndham Splits Company and Enters Growth Mode
Just as La Quinta was splitting its company in two, Wyndham was doing the same thing — only with a different purpose.
In August 2017, Wyndham announced it was splitting into Wyndham Hotel Group and Wyndham Vacation Ownership. The Hotel Group would focus on Wyndham Hotels, while the Vacation Ownership company would focus on timeshares. In post-announcement analyses and executive comments, common buzzwords included “growth opportunities,” “strategic flexibility” and “sharper focus.”
But there was more to the story behind the split. In 2017, all legacy hotel providers and chains were facing increasing pressure from companies like HomeAway and Airbnb — home-share providers eating into legacy market share.
In the face of this new competition, legacy providers enjoyed two attractive options. First, they could grow their number of rooms and locations, allowing for scale that would reduce operating costs. And, second, they could grow and improve loyalty programs — one of the few things keeping prospective customers from jumping to home-share services.
Which is why any analyst tracking the hospitality industry would be looking for mergers and acquisitions. Acquisitions would allow a legacy hotel provider to add rooms and locations to scale and reduce cost, and acquisitions would also allow a legacy hotel provider to grow and improve its loyalty program.
Wyndham took another big step on Oct. 4, 2017, announcing the $170 million acquisition of AmericInn and its management company. Wyndham had clearly gone into a post-split growth mode — and it wasn’t done yet.
What JetTrack Saw Leading Up to the Acquisition
Imagine the date is Jan. 17, 2018. It’s clear that La Quinta is searching for a company to acquire it. And it’s also clear that Wyndham is looking at growth opportunities.
But how would you discover signals (or validate existing signals) that Wyndham might be the company to purchase La Quinta?
Any analyst using JetTrack on Jan. 17 would have discovered those signals at the perfect time. A search of Wyndham flights dating back to June 2016 would have shown just two flights from Wyndham’s headquarters in New Jersey to the Dallas-Fort Worth area — where La Quinta’s headquarters are located:
Sunday, Nov. 19 2017: Morristown, NJ to Dallas, TX
Tuesday, Jan. 16, 2018: Morristown, NJ to Dallas-Fort Worth, TX
The first flight took place months after both companies had split — one to seek a buyer and the other to seek growth opportunities. And this first flight from New Jersey to Dallas-Fort Worth also occurred just one month after Wyndham announced its acquisition of AmericInn.
An analyst using JetTrack at the time wouldn’t know it, but the second flight took place just two days before the announcement of the acquisition. And, looking back after news of the acquisition broke, it would be clear that Wyndham’s team stayed through the announcement — leaving at 4:55 p.m. on Thursday, Jan. 18
JetTrack is helpful when you want to know where executives from specific companies have traveled. But part of JetTrack’s benefit is knowing just how rare those specific flights are.
For example, JetTrack’s database includes 216 Wyndham flights dating back to June 2016. It only turned up two flights to the Dallas-Fort Worth area — the same two flights that would have signaled something was brewing between Wyndham and La Quinta. It was rare for Wyndham executives to visit the Dallas-Fort Worth area, and they were clearly doing so in preparation for something huge.
The ultimate deal was a lifesaver for La Quinta investors. La Quinta shares had shed about 40% of their value since 2015. It would have been tempting to leave the position and write off the losses as La Quinta’s stock languished mostly around $16 and $17 throughout fall 2017. But, on the date of the announcement — Jan. 18, 2018 — the stock price jumped to a high of $21.06.
An in-the-know investor tracking the right signals could have made the perfect play at the exact right time. And JetTrack was one of the few tools that would have delivered those reliable signals.
Interested in taking a closer look at JetTrack? Contact us to learn more.