Cendant’s Buy Of Galileo Spawns Hospitality Powerhouse

NEW YORK— Cendant Corp.’s confirmed acquisition of Galileo and its already established travel portal, Trip.com, gives the hotel company the ability to offer hotel accommodations, car rentals and now airfare, setting it apart from the competition. The acquisition, expected to close this fall, frees up $95 million the company had set aside for travel portal development, since it will now use Trip.com, a highly recognizable URL, for its travel portal. The deal, valued at $33 per share, consists of $2.9 billion in cash and stock and the assumption of $600 million of Galileo’s net debt. How-ever, it is still subject to approval from Galileo stockholders. James Barlett, chairman/ president/CEO, Galileo, said that the existing synergies between Cendant and Galileo will hopefully increase Galileo’s shareholder value— which he feels is currently undervalued— since Cendant offers Galileo its “extensive travel industry experience, leading brands and very strong marketing capabilities.” Meanwhile, “Galileo brings its extensive global presence, solid customer relationships, the ability to delivery innovative technological goods to customers, and the valuable Internet asset— Trip.com,” added Barlett. But it’s Cendant’s marketing dollars that will hopefully push Trip.com— a fully developed website that will serve as Cendant’s travel portal— into the forefront of the online travel distribution industry. “We’ll take the [well-known] Trip.com URL… for our portal,” said Samuel Katz, Cendant’s chief strategic officer. “We’ll take their arrays of tools, which will reduce the cost of building a portal and create more cash for customer acquisition.” Frees Up Substantial Cash In fact, the deal will free up the $95 million set aside by Cendant to develop its travel portal. “We’ll now take some of that… and use it for our advertising, marketing and customer acquisition budgets,” said Henry Silverman, Cendant’s chairman/president/CEO. Silverman said Trip.com’s existing inventory will augment Cendant’s inventory to create a premium travel portal, which he expects to become “one of the top three [most visited travel websites]by the fall or the end of this year.” from being “number four or five” currently. Katz noted Trip.com currently sees approximately 500,000 unique visitors each month, and that Cendant’s existing websites receive about 2 million unique visitors. “We’ll now be able to promote our portal on those sites,” he said. That could mean serious competition for some of the existing travel distribution websites such as Travelocity, Expedia and Orbitz. Additionally, Cendant is also rumored to be in negotiations to acquire Worldspan, which powers Orbitz, creating a possible antitrust investigation. Though Silverman was quick to note that he could not comment on market rumors or speculation, the company’s in-house lawyer did state that if Cendant were to do another transaction with a potential competitor that delayed the close of the Galileo transaction— due to an antitrust investigation— longer than March 31, 2002, Cendant would be required to terminate the transaction that delayed the Galileo closing. Silverman added that an antitrust investigation “is the only thing that could delay Galileo’s shareholder vote.” However, he thinks that would be unlikely. But since the travel portal is designed to be an unbiased, third-party distribution website, Cendant has to ensure that its own inventory will not be promoted on the site more than any other inventory. Mark Miller, president/COO, Cendant’s Travel Division, said that the company is determined to be “fair” and “completely unbiased.” Propelled Into Air Travel Furthermore, the Galileo acquisition allows Cendant to enter the air travel industry. “We are already a dominant player in road-based travel,” said Silverman, alluding to the recent Avis acquisition. He added that a Boston consulting firm recently determined that one-third of the people that travel by road in this co