8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): February 1, 2018

CHOICE HOTELS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-13393	52-1209792
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)
1 Choice Hotels Circle, Suite 400, Rockville, Maryland		20850
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (301) 592-5000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.01. Completion of Acquisition or Disposition of Assets

On February 1, 2018, Choice Hotels International, Inc. (the “Company”), completed its previously announced acquisition (the “Transaction”) of all of the issued and outstanding equity interests of WoodSpring Hotels Franchise Services LLC (“WSFS”), pursuant to a Unit Purchase Agreement (the “Purchase Agreement”), dated as of December 15, 2017, by and among the Company, WoodSpring Hotels LLC and WSFS.

The purchase price paid at closing (the “Closing Purchase Price”), funded by a combination of cash on hand and available borrowings, was approximately $231,000,000, reflecting adjustments for cash and indebtedness as well as reductions for transaction expenses payable by WSFS. The Closing Purchase Price is also subject to a customary post-closing adjustment.

The foregoing description of the Purchase Agreement and the Transaction does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2017 and is incorporated by reference herein.

Item 8.01. Other Events.

On February 1, 2018, the Company issued a press release announcing the consummation of the Transaction. A copy of that press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

Additionally, a copy of an investor presentation to be used in connection with discussions with analysts and investors regarding the consummation of the Transaction is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits

(a) Financial statements of business acquired.

The Company intends to file the financial statements of the business acquired as required by this Item 9.01(a) under cover of Form 8-K/A no later than 71 calendar days after the date this Current Report on Form 8-K was required to be filed.

(b) Pro Forma Financial Information.

The Company intends to file pro forma financial information as required by this Item 9.01(b) under cover of Form 8-K/A no later than 71 calendar days after the date this Current Report on Form 8-K was required to be filed.

(d) Exhibits. The following exhibits are filed herewith:

Exhibit Number	Description
2.1	Unit Purchase Agreement, dated as of December 15, 2017, by and among Choice Hotels International, Inc., WoodSpring Hotels LLC and WoodSpring Hotels Franchise Services LLC (incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2017).
99.1	Press Release of Choice Hotels International, Inc., dated February 1, 2018.
99.2	Investor Presentation of Choice Hotels International, Inc., dated February 1, 2018.

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EXHIBIT INDEX

Exhibit Number	Description
2.1	Unit Purchase Agreement, dated as of December  15, 2017, by and among Choice Hotels International, Inc., WoodSpring Hotels LLC and WoodSpring Hotels Franchise Services LLC (incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2017).
99.1	Press Release of Choice Hotels International, Inc., dated February 1, 2018.
99.2	Investor Presentation of Choice Hotels International, Inc., dated February 1, 2018.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CHOICE HOTELS INTERNATIONAL, INC.
Date: February 1, 2018	By:	/s/ Simone Wu
	Name:	Simone Wu
	Title:	Senior Vice President, General Counsel, Corporate Secretary & External Affairs

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EX-99.1

Exhibit 99.1

For Immediate Release

Choice Hotels: Hank Nathan

Tel: 301-592-6619

Email: Hank.Nathan@ChoiceHotels.com

CHOICE HOTELS COMPLETES ACQUISITION OF WOODSPRING SUITES BRAND AND FRANCHISE BUSINESS

ROCKVILLE, Md. (February 1, 2018) – Choice Hotels International, Inc. (NYSE: CHH), one of the world’s largest hotel companies, completed its acquisition of the brand and franchise business of WoodSpring Suites, an extended-stay lodging brand, from WoodSpring Hotels LLC. The acquisition was announced on December 18, 2017, and adds nearly 240 extended-stay hotels in 35 states to the Choice Hotels portfolio, creating an extended-stay portfolio of more than 350 properties with existing brands, MainStay Suites and Suburban Extended Stay.

WoodSpring Suites highlights include:

• The nation’s fastest growing economy extended-stay hotel brand with a demonstrated ability to expand its franchisee base.

• Experienced 21 percent RevPAR growth and 48 percent Gross Room Revenue (GRR) growth over the last three years.

• Increased net units by more than 25 percent since 2014 with nearly 20 properties currently under construction, and additional new market opportunities identified for continued growth.

• A focus on new construction, resulting in a portfolio of hotels that, on average, were built within the last seven years.

“I’m thrilled to officially welcome the WoodSpring Suites brand and its franchisees and owners to the Choice family. WoodSpring developers represent some of the best in the nation, and we look forward to introducing them to Choice’s powerful platform of technology and resources, helping to create further return on their investments,” said Patrick Pacious, president and CEO, Choice Hotels. “Choice has a strong pipeline for its new construction brands, including Cambria, Sleep Inn, MainStay, and Comfort, and this acquisition offers another new construction brand for our growth-oriented developer community. More importantly, the acquisition enables us to incorporate best practices from WoodSpring’s proven model across our extended-stay brands, and further strengthens Choice’s position as a leader in both hospitality and franchising.”

Transaction Details

Choice Hotels acquired the WoodSpring Suites brand, including franchise operations, marketing and development, for $231 million, subject to customary closing adjustments. The acquisition was funded with a combination of cash on hand and borrowings under Choice’s existing credit facility. The acquisition is expected to be accretive to financial performance in 2018, excluding one-time transaction and integration costs. Choice’s acquisition of WoodSpring constitutes an asset purchase for U.S. tax reporting purposes, and, as a result, the company expects to realize tax benefits that would lower the effective purchase price.

WoodSpring represents an asset-light franchise business with market leading capabilities that complements Choice’s existing extended stay business and serves a range of guests, from business travelers in need of temporary corporate accommodations to people seeking short-term lodging during relocation. The WoodSpring hotel management operations will remain a separate company and be renamed Nationwide Hotel Management Company LLC. A private real estate fund sponsored by Brookfield Asset Management Inc. simultaneously completed its purchase of over 100 company-owned hotels from WoodSpring. In addition to the current portfolio, the partnership is expected to serve as a source of future growth for the brand and Choice Hotels. The transaction was announced and effectively closed within a 45-day period.

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About Choice Hotels

Choice Hotels International, Inc. (NYSE: CHH) is one of the world’s largest hotel companies. With over 6,500 hotels franchised in more than 40 countries and territories, Choice Hotels International represents more than 500,000 rooms around the globe. As of September 30, 2017, over 800 hotels were in our development pipeline. Our company’s Ascend Hotel Collection^®, Cambria^® Hotels, Comfort Inn^®, Comfort Suites^®, Sleep Inn^®, Quality^®, Clarion^®, MainStay Suites^®, WoodSpring Suites^®, Suburban Extended Stay Hotel^®, Econo Lodge^®, Rodeway Inn^®, and Vacation Rentals by Choice Hotels^® brands provide a spectrum of lodging choices to meet guests’ needs. With more than 35 million members, our Choice Privileges^® rewards program enhances every trip a guest takes, with benefits ranging from instant, every day rewards to exceptional experiences, starting right when they join. All hotels and vacation rentals are independently owned and operated. Visit us at www.choicehotels.com for more information.

Forward Looking Statement

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” “should,” “will,” “forecast,” “plan,” “project,” “assume” or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management’s current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the performance of Choice Hotels and WoodSpring as well as the growth of WoodSpring and the other brands owned by Choice Hotels, the impact of the acquisition of WoodSpring on the financial performance of Choice Hotels and the tax benefits that may be realized as a result of the WoodSpring acquisition, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors. Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed

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in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; foreign currency fluctuations; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to our hotel development and financing activities; fluctuations in the supply and demand for hotel rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness. These and other risk factors are discussed in detail in the company’s filings with the Securities and Exchange Commission including our annual report on Form 10-K for 2016 and our quarterly reports filed on Form 10-Q. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

©2018 Choice Hotels International, Inc. All rights reserved.

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EX-99.2

Page WoodSpring Suites Closing February 1, 2018 Exhibit 99.2

Disclaimer 1 FORWARD-LOOKING STATEMENTS Certain matters discussed in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "should," "will," "forecast," "plan," "project," "assume" or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management. Such statements may relate to projections of the performance of Choice Hotels and WoodSpring as well as the growth of WoodSpring and the other brands owned by Choice Hotels, the impact of the acquisition of WoodSpring on the financial performance of Choice Hotels and the tax benefits that may be realized as a result of the WoodSpring acquisition, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors. Several factors could cause actual results, performance or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions; foreign currency fluctuations; operating risks common in the lodging and franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to our hotel development and financing activities; fluctuations in the supply and demand for hotel rooms; our ability to realize anticipated benefits from acquired businesses; the level of acceptance of alternative growth strategies we may implement; operating risks associated with our international operations; the outcome of litigation; and our ability to manage our indebtedness. These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission including our annual report on Form 10-K for 2016 and our quarterly reports filed on Form 10-Q. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Summary EXECUTIVE Choice Hotels International has closed the acquisition of the WoodSpring Suites franchising business Asset-light acquisition that complements Choice’s existing portfolio of brands Expands Choice’s extended stay portfolio to more than 350 hotels Strong existing multi-unit developer relationships Includes future development agreement with a Brookfield Asset Management-sponsored private real estate fund, which just closed on the acquisition of over 100 WoodSpring locations Deal Structure Choice will acquire 100% of WoodSpring’s franchising operations for $231 million1 Includes only franchise business; existing real estate acquired by a Brookfield Asset Management-sponsored private real estate fund; hotel management continues to operate as a separate entity Transaction funded through cash and borrowings under Choice’s existing credit facility Valuation enhanced by 2018 openings, near-term development commitments and tax structuring benefits With acquisition, Choice’s leverage levels remain at low end of targeted 3.0x-4.0x debt/EBITDA range Overview of WoodSpring 239 locations (~28,680 rooms) across 35 states All hotels purpose-built since 2003; average age less than 7 years Only brand in segment with demonstrated franchising growth System-wide occupancy averages 78% with growth in new business travel segments that complement Choice’s leisure strength (1) Purchase price subject to closing adjustments relating to working capital, cash, indebtedness and transaction expenses

WOODSPRING Historical Growth Robust Pipeline Strong pipeline accelerates EBITDA growth over the next several years Nearly 20 properties currently under construction Over 70 hotels in various stages of entitlement Unit Growth Gross Rooms Revenue RevPAR 25% Unit Growth 48% GRR Growth 21% RevPAR Growth $33.18 $27.49 * Figures as of December 31, 2017

Deal Rationale STRATEGIC Consistent with focused strategy Strategy focused on brands with high return on investment for owners and expected runway for growth WoodSpring brand expected to further benefit from Choice’s technology and business delivery Delivers scale and additional growth potential in extended stay segment WoodSpring brand and overall extended stay segment RevPAR growth have outpaced the broader industry Bolsters Choice’s presence in segment and builds on new construction growth of the MainStay Suites brand Nearly triples size of Choice’s extended stay portfolio with a strong pipeline of 190 hotels; additional opportunity for growth with over 300 high quality locations Choice’s extended stay 2017 pro-forma royalty revenues increased by ~$18 million; EBITDA increased ~$15 million; future growth expected in 2018 and beyond1,2,3,4 Expands franchise base with new franchisees/owners Strong partnership with Brookfield Asset Management, one of the world’s largest real estate owners WoodSpring’s multi-unit real estate developer community can accelerate the growth of Choice’s existing extended stay portfolio and contribute to the growth of other Choice brands Revenue includes only royalty fee revenue; excludes ~$3 million of other revenue from WoodSpring Revenue and EBTIDA figures exclude revenue and expenses related to the marketing and reservation fund All figures presented represent a full year (i.e., 12 months) Revenue and EBITDA figures exclude impacts of ASC 606 (Revenue Recognition Standard)