Cendant

Cendant Corporation was an American provider of business and consumer services, primarily within the real estate and travel industries. In 2005 and 2006, Cendant broke up and spun off or sold its constituent businesses. Although the company was based in New York City, the majority of Cendant's headquarters employees were located in Parsippany-Troy Hills, New Jersey.

Cendant Corporation
Formerly
Hospitality Franchise Systems
IndustryBusiness and consumer services
FateBroken up
Defunct2006
Headquarters,

The last CEO of Cendant was Henry Silverman.

HistoryEdit

FoundingEdit

Henry Silverman, a business executive and private equity investor created Hospitality Franchise Systems (HFS) as a vehicle to acquire a number of hotel franchises in the early 1990s. Among Silverman's purchases were such brands as Ramada and Howard Johnson's as well as Days Inn, which he was able to buy for $290 million (less than half what he had sold it for) after the company had filed for bankruptcy in 1991. Silverman took Hospitality Franchise Systems public in a 1992 IPO.[1] HFS was among the fastest growing companies of its size in the 1990s and the company's stock rose from its IPO price of $4 per share to $77 per share in 1998.

The company made a brief foray into the casino industry, but then spun off that business in November 1994 as National Gaming.[2]

HFS expanded into the real estate business in 1995, acquiring Century 21, a franchised chain of brokerages, from MetLife for $200 million.[3] This was followed the next year with the acquisition of Electronic Realty Associates for $37 million,[4] and Coldwell Banker for $740 million, making HFS the largest franchisor of real estate brokerages in the U.S.[5]

In 1996, HFS acquired the Avis car rental company for $793 million.[6][7] In keeping with HFS's strategy of being primarily a franchisor, it kept ownership of the Avis brand name and reservations system, while selling off the operations of Avis's corporate-owned locations as a new company, Avis Rent a Car, Inc.[8][9]

In 1997, HFS acquired PHH Corp. for $1.8 billion.[10] PHH's businesses of mortgage brokerage, relocation services, and fleet management were expected to synergize with HFS's real estate and car rental businesses.[11]

In 1998, HFS purchased the Jackson Hewitt tax preparation company. However, later that year, Silverman led HFS into what would prove a disastrous merger with CUC International, a direct marketing company that operated discount membership programs like Shoppers Advantage and Travelers Advantage. The $14-billion merger of HFS and CUC resulted in the formation of Cendant Corporation in December 1997. Also, as part of the merger, Silverman announced he would reduce his day-to-day involvement with the company and assume the company's chairmanship in preference of CUC's founder and CEO Walter Forbes.

Accounting ScandalEdit

Just months after the merger, in April 1998 Cendant uncovered massive accounting improprieties at CUC which resulted in one of the largest financial scandals of the 1990s. At the time, Vice Chairman E. Kirk Shelton was reported to have inflated the company's revenue by $500 million over a period of three years. He had reported a 1997 net income of $55.4 million when the true 1997 result was a net loss of $217.2 million. As these irregularities in the books of Cendant were discovered in early 1998, an audit committee set up by Cendant's Board of Directors launched an investigation and discovered that the former management team of CUC, including its top executives Walter Forbes and Kirk Shelton, had been fraudulently preparing false business statements for several years.[citation needed] When this report was released to the public, the resulting damage to the market value for the company was approximately $14 billion, with their stock tumbling from a high of $41 down to nearly $12. At the time, this fiasco was the largest case of accounting fraud in the country's history. After the accounting scandal was uncovered, Silverman and the Cendant board forced Forbes’ resignation and Silverman assumed the CEO post.

In March 2001, Forbes and Shelton were indicted by a federal grand jury and sued by the Securities and Exchange Commission, which accused the company of directing the massive accounting fraud that ultimately cost the company and its investors billions of dollars. Shelton served 8 of his 10-year prison sentence before being released early for exemplary behavior. Former CEO Walter Forbes was sentenced to 12 years in prison in 2007.

Under Silverman, Cendant bounced back from the accounting scandal far outperforming the markets in the early 2000s.

Post-scandalEdit

Following the fraud debacle, Cendant began selling businesses to reduce its debt and repair the financial damage caused by the accounting scandal.[12] In 1998 the company sold Hebdo Mag, a publisher of classified advertising publications, for $450 million to a management buyout group.[13][14] In 1999 it sold its consumer software division, Cendant Software (consisting of Blizzard Entertainment, Davidson & Associates, Knowledge Adventure, and Sierra On-Line), to French publisher Havas for $770 million.[13][15]

By 2001, Cendant was again in acquisition mode.[16] It re-acquired the operations of Avis Rent a Car for $937 million.[17][18] In 2002, Cendant bought Budget Rent a Car out of bankruptcy for $110 million plus $2.8 billion in assumed debt.[19] The combination of Budget with Avis made Cendant the second-largest car rental company in the U.S.[19]

In 2004, Cendant began a series of moves to simplify its business and focus on its core areas of real estate and travel.[20]

As part of this strategy, several non-core businesses were sold or spun off. In June 2004, Cendant sold Jackson Hewitt for $638 million through an initial public offering.[21] In January 2005, Cendant spun off its mortgage and fleet management businesses as PHH Corporation.[22][23] The next month, Cendant sold its Wright Express division, a provider of fleet cards, for $1.03 billion through an initial public offering.[24] In October 2005, Cendant sold its marketing services division, including its membership shopping programs, to Affinion Group, a vehicle of Apollo Management, for $1.8 billion.[25][26]

Meanwhile, proceeds from these sales were used for acquisitions to expand Cendant's core businesses. In November 2004, Cendant purchased Orbitz, the third-largest travel booking site in the U.S., for $1.2 billion.[27][28] In December 2004, Cendant consolidated its control of the Ramada name by buying out Marriott International's stake in the hotel brand.[29][30] In February 2005, Cendant acquired Ebookers, the second-largest travel booking site in Europe, for $350 million.[31][32] In April 2005, Cendant acquired Gullivers Travel Associates, a British seller of travel packages and wholesale hotel nights, for $1.1 billion.[33][34]

BreakupEdit

On October 23, 2005, Cendant's strategy of simplification culminated in the announcement that it would split into four separate companies, focused respectively on hotels, real estate, travel services, and rental cars.[35] Silverman said the breakup would improve shareholder value by allowing the market to better recognize the value of Cendant's component businesses.[36]

Cendant originally planned to spin off its travel services division to shareholders as a company named Travelport, but on June 30, 2006, Cendant announced it would sell Travelport to The Blackstone Group, a private equity firm, for $4.3 billion.[37]

On July 31, 2006, Cendant's real estate and hotel divisions were spun off and became separate companies under the names Realogy and Wyndham Worldwide, respectively.[38][39]

The sale of Travelport to Blackstone was completed on August 23, 2006.[40] This left Cendant with only its car rental business, comprising Avis, Budget Rent a Car, and Budget Truck Rental. The company retired the Cendant name and renamed itself to Avis Budget Group on September 1, 2006.[41][42]

Former brandsEdit

Automobile rentalsEdit

Cendant owned the rental brands of Avis and Budget, holding these properties in the CCRG (Cendant Car Rental Group). Avis and Budget operate a shared fleet of cars, and have the same "back end" system, but operate at different locations, offer different service levels, and have somewhat different pricing. After the Cendant name was dissolved, the car rental segment became known as Avis Budget Group and currently trades on the NASDAQ stock exchange under the ticker symbol CAR.

Hotel franchisesEdit

These brands were spun off into Wyndham Worldwide.

Real estate franchisesEdit

These companies are now under the Realogy banner.

Membership programsEdit

These companies are now under the Affinion Group banner.

  • CUC International (Comp-U-Card)
  • Shopper's Advantage
  • AutoVantage
  • Traveler's Advantage
  • Buyer's Advantage
  • NetMarket
  • PrivacyGuard

Travel servicesEdit

These brands were separated into a new company called Travelport.

Timeshare companiesEdit

These companies are owned by Wyndham Worldwide.

Vacation network groupsEdit

ReferencesEdit

  1. ^ "Hospitality Franchise sells 6 million shares to public". The New York Times. December 10, 1992. Retrieved 2020-11-15.
  2. ^ "Hospitality Franchise: Sees trading symbol of 'NAGC'". Dow Jones News Service. November 10, 1994.  – via Factiva (subscription required)
  3. ^ David Klein (September 29, 1995). "HFS shakes up Century 21". The Star-Ledger. Newark, NJ – via NewsBank.
  4. ^ Beth W. Orenstein (February 18, 1996). "HFS buys Century 21, ERA but realtors expect little change". The Morning Call. Allentown, PA – via NewsBank.
  5. ^ Robert Keefe (June 1, 1996). "Coldwell Banker now part of HFS". Tampa Bay Times – via NewsBank.
  6. ^ Edwin McDowell (July 2, 1996). "HFS will acquire employee-controlled Avis for $800 million in cash and stock". The New York Times. Retrieved 2020-11-22.
  7. ^ "HFS completes purchase of Avis". Sun Sentinel. Fort Lauderdale, FL. Bloomberg. October 18, 1996 – via NewsBank.
  8. ^ "Avis shares hit the Street jumping". The Baltimore Sun. Bloomberg. September 25, 1997. Retrieved 2020-11-22.
  9. ^ Don Stancavish (July 2, 1996). "Avis to join HFS fold". The Record. Hackensack, NJ – via NewsBank.
  10. ^ Sean Somerville (May 1, 1997). "Sale of PHH to HFS OK'd too fast for tears". The Baltimore Sun – via NewsBank.
  11. ^ Sean Somerville (February 16, 1997). "Little guy grows fast". The Baltimore Sun – via NewsBank.
  12. ^ John T. Ward (May 25, 1999). "Cendant trims the fat by selling car business". The Star-Ledger. Newark, NJ – via NewsBank.
  13. ^ a b Form 10-K: Annual Report (Report). Cendant Corporation. March 1, 2000. pp. 33–34 – via EDGAR.
  14. ^ John T. Ward (August 13, 1998). "Cendant showing promised restraint". The Star-Ledger. Newark, NJ – via NewsBank.
  15. ^ Melissa Pozsgay (November 21, 1998). "Vivendi buys Torrance software unit". Daily Breeze. Torrance, CA – via NewsBank.
  16. ^ Howard Wolinsky (June 8, 2001). "Galileo travel company in talks to be bought". Chicago Sun-Times – via NewsBank.
  17. ^ "Cendant takes off with Avis". CNN Money. November 13, 2000. Retrieved 2020-11-22.
  18. ^ "Cendant completes acquisition of Avis Group Holdings, Inc" (Press release). Cendant Corporation. March 1, 2001 – via EDGAR.
  19. ^ a b Thomas S. Brown (November 26, 2002). "Cendant adds Budget to fold". The Daytona Beach News-Journal – via NewsBank.
  20. ^ Kevin G. DeMarrais (November 24, 2004). "Cendant spinoff could yield $1B". The Record. Hackensack, NJ – via NewsBank.
  21. ^ Raymond Hennessey (June 23, 2004). "Jackson Hewitt inches up after first day on markets". The Press of Atlantic City. Dow Jones – via NewsBank.
  22. ^ Teresa M. McAleavy (February 2, 2005). "Cendant completes its spinoff of PHH Corp". The Record. Hackensack, NJ – via NewsBank.
  23. ^ "PHH Corporation completes spin-off from Cendant Corporation" (Press release). PHH Corporation. January 31, 2005 – via EDGAR.
  24. ^ Matt Wickenheiser (February 17, 2005). "Wright Express offering seen as good for Maine". Portland Press Herald – via NewsBank.
  25. ^ Rob Varnon (July 27, 2005). "Cendant divisions to be sold". Connecticut Post – via NewsBank.
  26. ^ Form 10-K: Annual Report (Report). Affinion Group. March 23, 2007. p. 40 – via EDGAR.
  27. ^ Kathy Bergen (September 30, 2004). "Cendant to buy No. 3 Web travel firm". Baltimore Sun. Retrieved 2020-11-21.
  28. ^ "Cendant Corporation completes acquisition of Orbitz, Inc" (Press release). Cendant Corporation. November 12, 2004 – via EDGAR.
  29. ^ Kevin G. DeMarrais (September 16, 2004). "Agreement would give Cendant full control over Ramada brand". The Record. Hackensack, NJ – via NewsBank.
  30. ^ "Cendant Hotel Group completes acquisition of Ramada International" (Press release). Marriott International. December 10, 2004 – via HospitalityNet.
  31. ^ Form 10-K: Annual Report (Report). Cendant Corporation. March 1, 2005. p. 19 – via EDGAR.
  32. ^ "Cendant gets British travel site". The Star-Ledger. Newark, NJ. December 3, 2004 – via NewsBank.
  33. ^ "Cendant acquires U.K. travel firm". The Record. Hackensack, NJ. April 2, 2005 – via NewsBank.
  34. ^ "Cendant Corporation acquires Gullivers Travel Associates And OctopusTravel.com" (Press release). Cendant Corporataion. December 16, 2004 – via EDGAR.
  35. ^ Ellen Simon (October 24, 2005). "Travel, real-estate giant Cendant to split into four companies". Associated Press – via NewsBank.
  36. ^ Joseph R. Perone (October 25, 2005). "Investors skeptical about Cendant spinoffs". The Star-Ledger. Newark, NJ – via NewsBank.
  37. ^ Claudia H. Deutsch (July 1, 2006). "Blackstone plans to acquire Cendant travel services unit". The New York Times. Retrieved 2020-11-15.
  38. ^ "Cendant Corporation completes spin-offs of Realogy Corporation and Wyndham Worldwide Corporation" (Press release). Cendant Corporation. July 31, 2006 – via EDGAR.
  39. ^ Joseph R. Perone (August 1, 2006). "Cendant's split into 4 firms effective today". The Star-Ledger. Newark, NJ – via NewsBank.
  40. ^ "Blackstone Group completes acquisition of Cendant's Travelport subsidiary" (Press release). The Blackstone Group. August 23, 2006. Retrieved 2020-11-15.
  41. ^ Form 8-K: Current Report (Report). Avis Budget Group. September 5, 2006 – via EDGAR.
  42. ^ Kaja Whitehouse (August 30, 2006). "Cendant changes wrapped up at tense meeting". The Star-Ledger. Newark, NJ. Dow Jones – via NewsBank.