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Cendant buying Galileo
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June 18, 2001: 12:00 p.m. ET
Franchiser to buy Galileo for cash and stock and assume $600M debt
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NEW YORK (CNNfn) - Cendant Corp., the company that owns the Avis rental car and Howard Johnson hotel brands, agreed Monday to buy Galileo International Inc. for $2.9 billion in cash and stock in a bid to expand into the electronic travel reservation business.
Cendant, which also franchises Ramada Inns and other brands, said it will buy Rosemont, Ill.-based Galileo (GLC: up $1.34 to $31.14, Research, Estimates) for stock and cash valued at about $33 a share. That represents about a 12 percent premium to Galileo's closing stock price June 6, the day before the companies announced they were in merger talks.
Under the deal, New York-based Cendant (CD: up $0.72 to $19.17, Research, Estimates) will also assume about $600 million of Galileo debt.
"The global travel industry is benefiting from favorable demographic trends in the U.S. and strong international growth," said Cendant Chairman Henry Silverman said. "Galileo's fee-for-services business model, customer relationships and customer base are highly
complimentary to Cendant's."
Galileo boasts access to more than 500 airlines, 40 car rental companies and 45,000 hotel properties worldwide. While it has made significant strides in developing its overseas capabilities, the company has lost ground in the U.S. domestic market. It also owns Trip.com, where consumers can book hotel rooms, airlines and car rental.
The deal will make Cendant the prime competitor of Sabre Holdings Corp. (TSG: down $0.48 to $50.10, Research, Estimates), the No. 1 computerized travel reservations firm.
Cendant, which franchises Ramada Inn, Howard Johnson and other hotel brands, is making acquisitions again after three former executives of a company that merged to form Cendant pleaded guilty last year to accounting fraud -- a scandal that led to a $2.8 billion settlement with Cendant's shareholders.
Airline company UAL Corp. (UAL: up $0.72 to $33.00, Research, Estimates), Galileo's largest stockholder with about 18 percent of outstanding shares, has given Cendant a proxy to vote in favor of the deal, Cendant said.
The latest deal is expected to add to Cendant's earnings and cash flow, the company said in a statement. The purchase will add 10 to 14 cents a share to Cendant's 2002 earnings.
The company also expects to incur about $70 million to $80 million in merger savings in 2002, which should grow to $100 mill in 2003.
Galileo's CEO James Bartlett will step down after the deal is completed, the companies said. The transaction, expected to close in the fall, is subject to approval by regulators and shareholders, the companies said.
JP Morgan advised Galileo while Salomon Smith Barney served as advisor to Cendant.
-- Reuters contributed to this report 
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Cendant Corp.
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