Monday, August 13, 2001

Cheap Tickets
bought out

A mainland travel firm buys
the isle company for approximately
$425 million in cash

By Russ Lynch

Cheap Tickets Inc., the Honolulu-headquartered travel discounter founded in 1986, is being sold to New York-based Cendant Corp. for $16.50 a share, or about $425 million in cash.

The cost to Cendant, a New York-based travel industry giant, will be more like $280 million, because Cheap Tickets has some $145 million in a mixture of cash in the bank and assets that are worth cash, but shareholders will get their $16.50 a share under a definitive agreement announced today.

The stock market reacted quickly, sending Cheap Tickets stock soaring nearly 40 percent in early trading on the Nasdaq exchange. By mid-afternoon, Cheap Tickets was up $4.50, or 38 percent, trading at $16.35 a share.

Cendant had revenues of $3.9 billion last year and has been on an acquisition campaign. The travel industry giant, which is also big in real estate and in commercial financing, recently announced a $3 billion deal to buy online travel business Galileo International. Employing some 57,000 people around the world, Cendant owns such brands as Avis, Days Inn, Howard Johnson, Ramada Inn and Travelodge.

The price is good news for Cheap Tickets founder Michael J. Hartley and his wife Sandra, who together own about 47 percent of the stock or more than 11 million shares, worth well over $180 million at the price Cendant agreed to pay.

Their profit will be much less after deducting the amount they paid for the shares and capital gains taxes. Still, it is a solid reward for the Hartleys, Honolulu residents who went deeply into personal debt to launch the company, a pioneer in making deals with airlines to pay very low prices for unsold seats and resell them at well below posted retail fares.

Hartley was also a pioneer of Internet travel sales, putting the discounted airline tickets business online in 1997 with the launch of the Web site

The business later expanded into a retail travel agency as well, selling not just airline tickets but cruises, hotel rooms, rental cars and other travel services on commission.

In February, Hartley changed his title to executive chairman, from chief executive, and the CEO title went to Sam Galeotos, president and chief operating officer since October 1999.

Hartley, 51, said he wanted to work on long-term strategy and would work closely with Galeotos.

Cheap Tickets had gross sales of $666 million last year, up 34 percent from $495 million the previous year.

Cendant sees the company, which employs about 1,300 nationally and 440 in Hawaii, as a good mix with its business. Cendant has an affiliate called Travel Portal Inc.

The company said after the Cheap Tickets acquisition, which is expected to close this fall, Cheap Tickets' Internet business will be integrated into TPI and the Cheap Tickets call centers will come under the Cendant parent. The Web site accounts for about 40 percent of Cheap Tickets' gross travel bookings.

The companies were not saying today whether the deal will bring any changes to the employees.

Galeotos said in the news announcement issued before the stock markets opened that Cheap Tickets management "is very excited about joining Cendant and TPI."

Cheap Tickets Inc.

>> Headquarters: Honolulu
>> Call centers: Honolulu; Los Angeles; Lake Port, Calif.; Colorado Springs, Colo.; and Tampa, Fla.
>> Founded: 1986 by ex-airline executive Michael J. Hartley
>> Stock: First issued in 1999. Trades on Nasdaq as CTIX
>> Business: Discount leisure travel, centered on unpublished airline fares at big discounts
>> Sales: $666 million gross bookings last year, expecting $800 million this year. Serves 3 million travelers a month through Sells one ticket every 10.5 seconds
>> Employees: 1,300 overall, 440 in Hawaii.
>> The deal: New York-based travel industry giant Cendant Inc. will pay $16.50 a share for all CTIX shares, a total of $425 million cash. Deal to close this fall.

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