Transcript: Cendant's Split Decision

This is a partial transcript from "Your World with Neil Cavuto," October 26, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: You may not know the name Cendant (CD), but trust me, you know a lot of its companies, Coldwell-Banker, Ramada Inn, Orbitz. That's just a few.

It's the reason why my next guest thinks splitting up Cendant is the right thing to do, into four companies, at that. Henry Silverman is his name.

And we were talking, Henry, during the break that that seems to be the trend now, companies that got together, Viacom (VIA), with all of its entities, AOL and Time Warner (TWX), with their entities. Now it's cooler if you spin them off.

HENRY SILVERMAN, CHAIRMAN & CEO, CENDANT CORPORATION: Investors are telling us that our mantra, which was, we manage risk through size and diversity, is no longer applicable in today's world.

Investors want to hedge their own portfolios. They don't want you, as a manager, to assemble a portfolio. And they are in a position of saying, we will figure out our own diversification. So, it's a different environment, Neil, than we were dealing with five or six years ago.

CAVUTO: Yes. Why wasn't it rewarded when you announced it, though?

SILVERMAN: I think there a lot technical reasons.

All the index funds who own our stock — and almost a quarter are owned by index funds — probably are going to have to sell, because not all of our companies will be in the S&P 500 (search). A lot of the large-cap funds have to sell, because most of the companies will not be in a $20 billion large-cap universe.

CAVUTO: Yes. But you must have seen, Henry, that the benefit of what you were offering would outweigh the index fund issue.

SILVERMAN: Oh, I am convinced, and our board and advisers are convinced, that it will. But, to us, the measure of success is perhaps a year from now, a few months after the spin-off is complete, when these four companies, we believe, in the aggregate, will have a value significantly in excess of where the whole is today.

CAVUTO: I know the individual pieces are going to be worth more than the whole. That's the argument that a lot of companies like yours are expressing.

What if you're wrong on that, just like you were wrong on the pairing of all of them?

SILVERMAN: I don't think we're going to be wrong.

It's hard to answer that hypothetical, but each company is going to be able to really define its own benefits. We have empirical data, Neil, that supports this. This is not just an idea. We created three public companies in the last year, 200 percent IPOs and one spin-off. They have well outperformed the S&P 500, outperformed Cendant and outperformed their peers.

And, in talking to managers, who all used to work for us, they find this experience liberating and energizing. And I believe the four new C.O.s that we're creating are going to have the same experience.

CAVUTO: In the meantime, I know you are going to be around a while, you said 2007, 2008, you will be history at the company. I can't picture that.

SILVERMAN: Well, retiring from a public company doesn't mean retiring from life, and it doesn't mean retiring from a business life.

CAVUTO: So, what do you do?

SILVERMAN: Assuming I'm healthy, we can talk about it then.

CAVUTO: Would you ever run for office?


CAVUTO: Do you like politics?

SILVERMAN: No. Yes, I like it, but I like to observe it, as opposed to be a participant.

CAVUTO: But stop observing it be a part of it?

SILVERMAN: I don't think so.

CAVUTO: Really?

SILVERMAN: I think you, the media, have made the process — I don't mean you personally — but the media...


SILVERMAN: The media has made it too hard. Too intrusive. And if you talk to people that we both know in the political life, if you talk to CEOs we both know or C.O.s, it's just too hard.

CAVUTO: Yes. And there's a lot hell to pay for whatever you do.

SILVERMAN: There is, indeed.

CAVUTO: Henry Silverman, thank you very much. He's the man who runs Cendant, soon four companies.

When is all this final?

SILVERMAN: It will be done the summer of 2006.

CAVUTO: All right.

Thank you, sir. Always good seeing you.

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