Cendant To Buy Orbitz For $1.25 Billion

Cendant Corp. and Orbitz today reached a definitive agreement for Cendant to buy all the shares of Orbitz for $27.50 per share in cash or $1.25 billion. The parties to the deal, which is subject to regulatory and other approvals, expect to complete it in November.

The acquisition was "not completely surprising," said Ian Wheeler, vice president of marketing for global distribution system competitor Amadeus, "Cendant has gone through a process of vertical integration, and this is in keeping with that strategy. What is unclear is what this means to the marketplace. Will Orbitz somehow be integrated, or will it continue business as usual? If the Cendant-Orbitz deal goes through, you will see more of these types of deals."

Cendant in a press release issued today said it plans to offer both its Travelport and Orbitz products for the corporate market, but will migrate its Travelport architecture to run on the Orbitz platform.

Samuel Katz, chairman and CEO of Cendant Travel Distribution Services Division, said, "What to do with the two businesses is an area in which we have a problem of having to figure out how to take two businesses with a lot of traction, each with some unique stuff, and put them together on one platform that will create even better products. The buyers will get the chance to have broader offerings and choose the path they want to go down. There are a lot of decisions to be made around that for which, quite frankly, we have got to talk to the customers. So far, it has all been very positive feedback."

Orbitz will remain a separate business unit, based in Chicago. Jeff Katz, Orbitz chairman, president and CEO, will leave the leadership of the unit in the hands of the existing senior management team after a transition period before year-end. "We're pleased that the consumer-friendly and supplier-friendly aspects of the Orbitz model will go forward due to Cendant's agreement to continue providing unbiased fare displays on Orbitz.com and to maintain Orbitz Charter Associate and Supplier Link contracts providing low distribution costs," Jeff Katz said.

Jeff Katz, who is not related to Sam Katz, said the two have known each other for a long time but that Cendant broached this deal only several weeks ago. Jeff Katz said he expected that this would improve choice and product functionality for users of both corporate products.

Cendant also will uphold the 10-year commitment Orbitz made to use Worldspan that it reached three years ago.

Meanwhile, the deal seems to be a good thing for all involved, according to travel management technology consultant Robert Lichtman of the Corporate Solutions Group in Menlo, Calif. "Airlines get the cash, which they need desperately, Cendant gets a really good product that has terrific branding, Orbitz gets lower fees and better vendor relationships and Orbitz customers get a more stable environment with the resources of a major travel supplier," he said. "Clearly, Travelport, by comparison, has not been as successful."

Cendant CFO Ronald Nelson said the deal was in keeping with the company's strategic approach. "We will use the proceeds from the sale of Jackson Hewitt, a non-core unit, along with additional cash on hand, to acquire a strategic asset with near- and long-term growth opportunities. The transaction also meets all of our previously defined acquisition parameters: It is strategic to our Travel Distribution Services Division, it substantially strengthens our competitive position by adding management talent and enhancing our travel technology capabilities and it is accretive within the first year of the acquisition."