Cendant says open to offers for assets sale
July 14, 1998 05:59 PM
By Brendan Intindola
NEW YORK, July 14 (Reuters) - Cendant Corp. chief executive Henry Silverman said in a conference call Tuesday the company will entertain unsolicited offers for assets not considered core operations, a reversal of Cendant's recent swift growth via acquisitions, participants in the call said.
The conference call, held to detail the preliminary findings of the company's probe of accounting fraud and errors at the former CUC International, which merged last December with HFS Inc in an $11 billion deal creating marketing and franchising giant Cendant.
The participants -- including traders, investors and analysts -- also said they gleaned scant information about executive succession, with Chairman Walter Forbes, and CEO and president Silverman set to swap positions on January 1, 2000.
Silverman, former HFS chairman, said several times during the call executive succession is a matter for the directors of the company to address, and declined to comment specifically, the participants said.
The preliminary report details fictitious revenues, overstatement of assets and delayed recognition of canceled CUC memberships, among other discrepancies, Cendant said.
Forbes, former chairman of CUC, said he had no knowledge of the accounting irregularities before they were uncovered earlier this year.
"Silverman is handcuffed right now. He never once stood up for Forbes (during the call). He just said it is a question for the board to consider," said a trader who was on the call, adding Forbes said little during the conference.
Cendant ended New York Stock Exchange trade with a 3-1/16 loss, or 16.3 percent, at 15-11/16. It was Big Board's most active issue with over 44 million shares traded. In third market trade before the NYSE open, the stock hit an all-time low 14. The year-high Cendant stock price is 41-11/16.
The Cendant stock rout follows Monday's 3-1/8 fall to 18-7/8, market activity that Silverman told Reuters has prompted him to request a U.S. Securities and Exchange Commission investigation into Cendant trading activity.
"Clearly, Silverman sounded shaken by the magnitude (of the investigation's findings). Someone had loose lips and if the SEC cares about its reputation, it will do something about the way the information was disseminated. I think behind the scenes there will be someone found responsible for this and if the SEC doesn't do it, Henry Silverman will," the trader said.
On Cendant's pending $3.1 billion hostile-turned-friendly takeover of American Bankers Insurance Group Inc ABI , worth $67 per ABI share, call participants noted Silverman's emphasis on Cendant's contractual obligation to complete the deal.
"I wanted to hear him say we are fully committed to the deal at 67 (per ABI share). I was taken aback by him saying it is not a matter of wanting to do the deal, but commitment to the contract," the trader said.
In a subsequent interview, Silverman told Reuters, "We intend to close on that commitment. I spoke with Gerry Gaston (American Bankers CEO) and he told me he was fully on board."
American Bankers shares ended NYSE trade 1-13/16 lower at 57-15/16.
Shedding assets would be an about face for Cendant, which has grown into a brand name behemoth -- with interests in travel, car rentals, lodging, real estate, mortgages, software and publishing -- through numerous acquisitions, the largest being the $11 billion "merger of equals" between" HFS and CUC.
Cendant's brands include Century 21, Coldwell Banker, Super 8 Motels, Ramada, Entertainment coupon books and PHH Corp.
Conference call participants said Silverman noted Cendant has passed a six-month restriction period that began with the CUC-HFS merger, which now permits Cendant to entertain unsolicited offers for parts of the company.
As for the investigation, Cendant said the latest findings are expected to cut 1997 net income before merger-related and one-time charges by 22 cents to 28 cents per share, nearly double the previously expected 1997 impact, first announced in mid-April.
Silverman told Reuters the company expects to report 1998 operating earnings of $1.08 per share in 1998 and $1.30 per share in 1999.
Cendant reported 1997 income of $1.00 per share before one-time charges.
The consensus estimate of Wall Street analysts' forecasts for 1998 was $1.13 per share, according to research firm First Call Corp.
Cendant said its investigation confirmed accounting irregularities existed in CUC's financial statements in years prior to 1997 and that in addition to 1997, 1996 and 1995 results will be restated to correct the irregularities.
((--Brendan Intindola, N.Y. Equities, 212-859-1734)). REUTERS
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