CD to Sell Travel Unit? 04.24.06; Marketwatch
Cendant confirms it may sell travel unit instead of spinoff
April 24, 2006 Monday 11:53 AM EST
marketwatch.com;
CHICAGO (MarketWatch) -- "Cendant Corp. shares were on the rise Monday, gaining as much as 5% after the company said it will consider selling its travel-distribution-services division.
Cendant (CD) had previously said it would spin off the business to shareholders as part of a four-way breakup into publicly traded units.
But the company's received "a number of unsolicited indications of interest to acquire" the unit -- known within Cendant as TDS but renamed Travelport last week, said Henry Silverman, Cendant's chairman and chief executive, in a statement.
The unit -- with businesses including Galileo, a distribution system serving more than 50,000 travel agencies and 60,000 hotels; Gullivers Travel Associates, a wholesaler and online provider of hotels, destination services, travel packages and group tours; and online travel agencies including Orbitz -- could fetch in the neighborhood of $4 billion, according to analyst estimates.
Another reason for considering a sale, Silverman said, is that "a sale of TDS is not expected to result in a material tax liability, as would a sale of Cendant's other divisions."
Cendant had said that it expected to close a spinoff of the unit in October.
Cendant also reiterated plans to spin off Realogy Corp. and Wyndham Worldwide to shareholders. The move "would result in three separate public companies, including Avis Budget Group Inc., if TDS is sold," Cendant said.
Cendant said that whether it sells or spins off the travel unit, it would use proceeds from its separation plan to pay down debt outstanding.
Shares of Cendant moved as high as $17.86 and traded lately at $17.57, up 72 cents, or 4.3%.
"We think investors have been too negative on [the travel] business, due to near-term weakness in operating performance," wrote Christopher Gutek at Morgan Stanley. "However, we see an upside scenario for this business emerging in a few quarters, as Galileo's contracts get renewed, as ebookers' problems get fixed, and as Orbitz continues to generate decent growth."
All "four of the company's soon-to-be separate businesses are viable if not likely acquisition candidates" and are particularly "attractive to private equity firms," the analyst said." |
