Cendant to Buy Orbitz in $1.25B Cash Deal

Hotel franchisor Cendant Corp. (CD) agreed to buy online travel company Orbitz Inc. (ORBZ) for about $1.25 billion.

The $27.50 a share cash offer, which has been approved by boards of both companies but still needs regulatory approval, represents a premium of 32 percent to Orbitz's Tuesday closing price of $20.77.

Shares of Orbitz, which has been a publicly traded company for less than a year, rose $6.44, or 31 percent Wednesday morning, to $27.21 on the Nasdaq Stock Market. Shares of Cendant, which owns the Avis rental car and Century 21 (search) real estate brands, fell by 19 cents to $21.83 on the New York Stock Exchange (search).

Orbitz, which was founded by five major airlines, competes with sites such as Expedia (EXPE) and Travelocity and has grown rapidly since its inception in early 2000 as more than one-fifth of all travel is booked online. The economic downturn spurred a wave of bargain hunting among business and leisure travelers, fueling the boom of the industry.

With Cendant's financial backing, Orbitz will certainly become a tougher competitor for Expedia and Travelocity.

The sale of Chicago-based Orbitz also comes at a good time for the airlines who helped found it, delivering these shareholders a burst of cash at a time when major carriers are losing millions every day. The founding airlines were American Airlines, United Airlines, Northwest Airlines, Continental Airlines and Delta Air Lines.

Samuel Katz, the CEO of Cendant's travel distribution division, which includes the computer reservation system Galileo, said Orbitz would mesh nicely with the rest of the unit.

"The transaction provides a foundation for significant synergies in technology, fulfillment and operations, which will allow both Orbitz and CheapTickets to continue to aggressively market and promote their respective brands while increasing profitability," he said.

Cendant, based in New York, also owns hotel brands such as Days Inn (search) and Ramada.