SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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May 25, 1999 (May 24, 1999)
(Date of Report (date of earliest event reported))
Cendant Corporation
(Exact name of Registrant as specified in its charter)
Delaware 1-10308 06-0918165
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or Identification Number)
organization)
9 West 57th Street
New York, NY 10019
(Address of principal (Zip Code)
executive office)
(212) 413-1800
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if applicable)
<PAGE>
Item 5. Other Events
References to "Cendant", "we" and "our" means Cendant Corporation and
its subsidiaries.
On May 24, 1999, we announced that we completed our strategic
realignment previously announced in December 1998 and, after careful study and
analysis, our board of directors and management have clearly and definitely
articulated Cendant's core operations.
Our core operations going forward will include the following divisions:
Travel (lodging franchisor, car rental (Avis) franchisor and our vacation
exchange service, Resort Condominiums International - RCI); Real Estate
(residential real estate brokerage franchisor, relocation and mortgage, Welcome
Wagon/GETKO, and our recently announced residential real estate services portal
on the Internet); Direct Marketing (Netmarket Group, individual membership and
insurance/wholesale) and Other Consumer and Business Services (NCP, Jackson
Hewitt Tax Service, and Wizcom). In addition, we will continue to leverage the
Internet as a utility for the marketing and distribution of products and
services within its core operations.
We also announced that Avis Rent A Car, Inc. has executed an agreement
with us to acquire our Fleet segment which includes PHH Vehicle Management
Services Corporation, Cendant Business Answers (Europe) PLC; The Harpur Group
Ltd.; and Wright Express Corporation for $1.44 billion in cash and $360 million
in Convertible Preferred Stock. The transaction is subject to customary
regulatory approvals and is expected to close on or about June 30, 1999. The
transaction follows a competitive bidding process (auction) undertaken by Chase
Securities Inc., Cendant's sole financial advisor. In 1998, the Fleet segment
reported net revenues of $387.4 million and EBITDA of $173.8 million. We will
record an after-tax gain of approximately $750 million from the transaction.
Total proceeds after taxes and expenses are estimated at $1.7 billion.
We also announced that the completion of our strategic alignment
contemplates the sale of our Entertainment Publications, Inc. subsidiary, our
Green Flag unit and other additional non-core asset sales.
Reference is made to Exhibit 99.1 herein, which is incorporated herein
by reference in its entirety.
Item 7. Exhibits
Exhibit
No. Description
99.1 Press release: Cendant Corporation Announces Completion Of
Its Strategic Realignment And Articulates Its Core Operations,
dated May 24, 1999.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENDANT CORPORATION
By: /s/ Jeanne Murphy
Jeanne Murphy
Senior Vice President and
Corporate Counsel
Date: May 25, 1999
<PAGE>
CENDANT CORPORATION
CURRENT REPORT ON FORM 8-K
Report Dated May 25, 1999 (May 24, 1999)
EXHIBIT INDEX
Exhibit
No. Description
- ------- --------------------------------------------------------------
99.1 Press release: Cendant Corporation Announces Completion Of Its
Strategic Realignment And Articulates Its Core Operations,
dated May 24, 1999.
EXHIBIT 99.1
FOR IMMEDIATELY RELEASE
CENDANT CORPORATION ANNOUNCES COMPLETION OF ITS STRATEGIC REALIGNMENT AND
ARTICULATES ITS CORE OPERATIONS
Avis Rent A Car, Inc. Agrees to Acquire the Company's
Fleet Segment for $1.8 Billion; Gain of $750 Million
Company Also Intends to Sell Green Flag Unit and Other
Non-Core Assets;
$1.0 Billion to $1.5 Billion In Additional Proceeds Expected
Proceeds To Be Used Primarily to Repurchase Cendant Stock
New York, NY, May 24, 1999 - Cendant Corporation (NYSE:CD) today
announced that it has completed its strategic realignment previously announced
in December 1998 and, after careful study and analysis, its board of directors
and management have clearly and definitively articulated the Company's core
operations.
The Company stated that its core operations going forward will include
the following divisions: Travel (lodging franchisor, car rental (Avis)
franchisor and the Company's vacation exchange service, Resort Condominiums
International - RCI); Real Estate (residential real estate brokerage franchisor,
relocation and mortgage, Welcome Wagon/GETKO, and the Company's recently
announced residential real estate services portal on the Internet); Direct
Marketing (Netmarket Group, individual membership and insurance/wholesale) and
Other Consumer and Business Services (NCP, Jackson Hewitt Tax Service, and
Wizcom).
In addition, Cendant will continue to leverage the Internet as a
utility for the marketing and distribution of products and services within its
core operations.
The Company's core operations are estimated by Wall Street to report
revenues of approximately $5 billion and EBITDA of about $2 billion in the year
2000 the Company said.
Cendant Chairman, President and CEO, Henry R. Silverman stated: "Cendant is
a vibrant, growing and financial strong company. With the completion of our
strategic realignment, Cendant is now a company that has well-defined core
competencies and is positioned to create value for shareholders."
<PAGE>
Cendant's Strategic Realignment Program Is Comprised of Three Phases
Phase One:
In phase one, the Company has sold Cendant Software, Hebdo Mag, Essex,
National Leisure Group, National Library of Poetry, and announced the proposed
sale of Match.Com, for net proceeds of approximately $1.4 billion. With the
proceeds of the sale of this first trance of assets, coupled with cash flow from
operations and a $1.55 billion bond offering in autumn 1998, the Company reduced
its outstanding shares by 91 million shares (11%), repaid all short-term debt
and reduced total debt outstanding by $700 million.
Phase Two:
The second phase includes the following specific actions:
Avis Rent A Car, Inc. has executed an agreement with Cendant to acquire
the Company's Fleet segment which includes PHH Vehicle Management Services
Corporation, Cendant Business Answers (Europe) PLC; The Harpur Group Ltd.; and
Wright Express Corporation for $1.44 billion in cash and $360 million in
Convertible Preferred Stock. The transaction is subject to customary regulatory
approvals and is expected to close on or about June 30. The transaction follows
a competitive bidding process (auction) undertaken by Chase Securities Inc.,
Cendant's sole financial advisor.
In 1998, the Fleet segment reported net revenues of $387.4 million and
EBITDA of $173.8 million.
The Company will record an after-tax gain of approximately $750 million
from the transaction. Total proceeds after taxes and expenses are estimated at
$1.7 billion.
"A key residual benefit of the Fleet acquisition by Avis is that
Cendant's potential fully-diluted interest in Avis increases from 19% to about
34%, which enables Cendant to share in the upside growth synergies realized
through the Avis/Fleet combination," Cendant Vice Chairman Stephen P. Holmes
said.
Phase Three:
The third phase, which completes the strategic realignment,
contemplates the sale of Entertainment Publications, the Company's Green Flag
unit and other additional non-core asset sales.
<PAGE>
The Company has engaged Merrill Lynch to consider strategic
alternatives for Green Flag, its UK roadside assistance unit, including the
possible sale of that business. When the Company purchased Green Flag in 1998,
it saw certain synergies with its UK Fleet operations. Due to the disposition of
these operations, Green Flag is no longer a strategic asset. However, the
Company said it has made a definitive decision to retain it other UK businesses
including its National Car Parks unit, although it may continue to sell portions
of NCP's real estate portfolio. Green Flag reported revenues of approximately
$190 million and EBITDA of about $19 million in the eight months of 1998 during
which it was owned by Cendant.
Cendant also announced that it intends to sell the following non-core
assets: Central Credit, Global Refund, North American Outdoor Group, Spark
Services and NUMA. In the aggregate, 1998 revenues and EBITDA for these five
business units were approximately $316 million and $34 million, respectively.
Cendant anticipates that the completion of the Fleet disposition and
the execution of the third phase described above will provide about $3 billion
in proceeds. The Company intends to utilize the net cash proceeds from the
disposition of these assets primarily to repurchase its stock in open market
transactions and/or through a self-tender on a Dutch Auction basis, depending
upon the amount of proceeds and timing of the transactions. The transactions
will be consistent with Cendant articulated goal of a 40% debt to total
capitalization ratio.
As a result of the disposition of the Fleet business and other asset
sales, the classification of Entertainment Publications as a discontinued
operation, and the seasonality of certain units being sold, the Company expects
the EPS may be reduced by $0.02 to $0.03 in 1999. The earnings impact of the
transaction should reverse in 2000, reflecting the full-year deployment of the
funds in 1999.
Cendant's PHH finance subsidiary is a separate SEC registrant and will
retain ownership of the PHH name. The Fleet management business being acquired
by Avis will continue to utilize the PHH Vehicle Management name under an
agreement with Cendant's PHH subsidiary. Following the completion of the
transaction, Cendant's PHH subsidiary will operate in two segments, relocation
and mortgage operations.
The Fleet disposition has been structured to enhance the capital
structure of the remaining PHH operations by reducing its debt outstanding and
improving its debt to equity ratio. Cendant remains committed to the financial
strength and independent financial operation of these subsidiaries and to
maintaining PHH's current commercial paper ratings. The relocation and mortgage
subsidiaries will continue to operate with the "firewall" provisions of the PHH
debt structure. The transaction conforms with all requirements of PHH's bank
credit agreements and debt indentures.
<PAGE>
Statements about future results made in this release may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations and the current economic environment. The Company cautions that
these statements are not guarantees of future performance. They involve a number
of risks and uncertainties that are difficult to predict. Actual results could
differ materially from those expressed or implied in the forward-looking
statements. Important assumptions and other important factors that could cause
actual results to differ materially from those in the forward-looking statements
are specified in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, including the resolution of the pending class action
litigation against the Company and the Company's ability to implement its plan
to divest non-strategic assets.
Cendant Corporation is a global provider of consumer and business
services. The Company's core competencies include building franchise systems,
providing outsourcing solutions and direct marketing. As a franchisor, Cendant
is the world's largest franchisor of hotels, rental car agencies, tax
preparation services and real estate brokerage offices. The real estate segment
also includes Welcome Wagon/GETKO and the Company's new residential real estate
services portal on the Internet. As a provider of outsourcing solutions, Cendant
is the world's largest vacation exchange service; a major provider of mortgage
services to consumers and the global leader in employee relocation. In direct
marketing, Cendant provides access to insurance, travel, shopping, auto, and
other services, primarily to customers of its affinity partners. Other business
units include NCP, the UK's largest private car park operator, and Wizcom.
Headquartered in New York, NY the Company has more than 30,000 employees and
operates in over 100 countries. More information about Cendant, its companies
and brands may be obtained by visiting our Web site at www.cendant.com or by
calling 877-4INFO-CD (877-446-3623).
Media Contact: Investor Contacts:
Elliot Bloom Denise Gillen
212-413-1832 212-413-1833
U.K. Media: Sam Levenson
Nick Miles 212-413-1834
Financial Dynamics
(011 44 171) 831-3113
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