January 18, 2018 / 1:10 PM / 9 months ago

UPDATE 3-Wyndham to buy La Quinta hotel business for $1.95 bln

* La Quinta to spin off its real estate assets ahead of sale

* Deal expected to close in second quarter of 2018

* Wyndham shares rise 5.2 pct; La Quinta up 2.6 pct (Adds analyst comment, updates share movement)

By Sanjana Shivdas

Jan 18 (Reuters) - Wyndham Worldwide Corp will buy La Quinta Holdings Inc’s hotel operations for $1.95 billion, it said on Thursday, adding another well-known U.S. brand and nearly 900 mid-scale, upper mid-scale and economy locations to its portfolio.

Wyndham Hotel Group, known for its own-brand hotels as well as Ramada, Days Inn and Super 8 budget lodgings, will have a total of 21 brands when the La Quinta deal closes as expected in the second quarter of 2018.

In terms of number of rooms, the deal would help Wyndham pip InterContinental to rank third globally, SunTrust analyst Patrick Scholes said. Marriott is top ranked, followed by Hilton.

La Quinta’s shares were up 2.6 percent, while those of Wyndham gained 5.2 percent in morning trading.

Moody’s Lodging analyst Peter Trombetta said the deal would be “credit-positive” for Wyndham by giving it more exposure to a segment where revenue per available room (RevPAR) - a key industry metric - was outperforming other businesses.

“(It) adds a well-performing brand to Wyndham’s mid-scale and upper mid-scale hotel portfolio – two segments that have been growing RevPAR faster than any other segment outside of the economy segment,” he said.

Last year, Wyndham Worldwide said it would spin off its business into two separate, publicly traded companies - Wyndham Hotel Group and Wyndham Vacation Ownership.

The planned spin-off of Wyndham Hotel Group remains on track for the second quarter of 2018, the company said on Thursday.

La Quinta shareholders will receive $8.40 per share in cash and Wyndham will repay about $715 million of La Quinta debt net of cash.

Ahead of the sale, La Quinta will also spin off its real estate assets into a publicly-traded real estate investment trust, CorePoint Lodging Inc.

Wyndham said it would set aside a reserve of $240 million for estimated taxes as part of La Quinta’s spin-off of its real estate assets.

La Quinta had a market capitalization of about $2.28 billion as of Wednesday’s close.

If the deal falls through, La Quinta will pay Wyndham a termination fee of $37 million.

Barclays is Wyndham’s financial adviser, while J.P. Morgan advised La Quinta. (Reporting by Sanjana Shivdas in Bengaluru; Editing by Sriraj Kalluvila)

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