NEW YORK – Cendant Corp., the franchising giant that owns the Avis rental car and Century 21 real estate broker brands, on Monday said it would buy Galileo International Inc., the world's No. 2 computerized travel reservation network, for $2.9 billion.
New York-based Cendant said it agreed to pay $33 a share for Galileo and will assume about $600 million of Galileo debt. Galileo shares closed at $29.80 on Nasdaq on Friday.
The deal, expected to immediately add to Cendant's cash flow and earnings, will make Cendant the prime competitor of Sabre Holdings Corp., the No. 1 computerized travel reservations firm.
``The global travel industry is benefiting from favorable demographic trends in the U.S. and strong international growth,'' said Henry Silverman, Cendant chairman, president and chief executive. ``Galileo's fee-for-services business model, customer relationships and customer base are highly complimentary to Cendant's.''
Rosemont, Ill.-based 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.
Cendant said it does not anticipate changes in Galileo's operational management or staff cuts that would hurt customer service. But it did announce the departure of Galileo's chief executive, James Barlett, once the transaction is complete.
The deal will likely close this fall and will probably add 10 to 14 cents a share to Cendant's 2002 earnings, Cendant said.
The price being paid for Galileo represents an 11 percent premium over its closing price on the New York Stock Exchange on Friday, and a more than 100 percent premium above the company's trading price in October, when it announced it intended to explore a possible sale or leveraged buyout.
Cendant shares, trading close to 52-week highs of $19.39, closed at $18.45 on the NYSE on Friday.
Airline company UAL Corp., 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.
New York investment bank J.P. Morgan Chase represented Galileo during the negotiations with Cendant. Salomon Smith Barney represented Cendant.
The acquisitive Cendant owns the franchising rights for brands such as Avis, Century 21, the hotel chains Days Inn and Ramada, and time-share resort operator Fairfield Communities, among others.