Monday, October 8, 2001

Cendant closes
offer for Cheap Tickets

The deal could be finalized
tomorrow after 90% of
stockholders tender shares

By Russ Lynch

Cendant Corp. said today its tender offer for Honolulu-headquartered Cheap Tickets was successful and, with more than 90 percent of Cheap Tickets' stock in its hand, it expects to close the deal as soon as tomorrow.

The New York-headquartered international travel and real estate giant's offer of $16.50 a share for Cheap Tickets ended Friday. The amount of shares that were offered in response allows it to take over the company immediately. The shares that were not turned in will cease to exist. Instead, those holders will receive rights worth $16.50 cash for each share they were holding, Cendant said.

The conclusion of the sale is good news for Cheap Tickets founder Michael J. Hartley and his wife Sandra, whose personal holdings in their company were worth well over $180 million at the Cendant price. The Hartleys, who formed the company in 1986 and took it public in 1999, won't end up that much ahead, since they paid for many of their shares in the first place and they may have to face substantial taxes, but it is still a large return for them.

It also appears to have been a good deal for many other Cheap Tickets holders, who have seen the stock drop as low as less than $7 in the last 12 months.

A Cendant spokesman said his company expects to announce "very soon" the details and timing of what happens after the acquisition is complete. The announcement will be made as soon as the deal is formally concluded which, if not tomorrow, will be a matter of days, he said.

When deal first surfaced in August, Cendant said its plans called for:

>> Integrating the Internet discount travel bookings side of Cheap Tickets into a new online affiliate of Cendant called Travel Portal Inc., which would also offer Web bookings for Cendant's leading brands, such as Days Inn, Howard Johnson and Ramada Inn.

>> Cendant would take over Cheap Tickets' off-line booking business, such as its call centers in Honolulu; Tampa, Fla.; Colorado Springs, Colo.; and Lakewood, Calif.; and its lone remaining retail travel shop, the kiosk on Kapiolani Boulevard in Honolulu where the business got started.

>> Cheap Tickets executives such as Sam Galeotos, president and chief executive officer, were expected to stay on and work for the new operation.

It was not known today whether those arrangements will change in the wake of the slump in travel following the Sept. 11 terrorist attacks on the United States.

In late September, Cheap Tickets said 81 of its 367 Hawaii workers will lose their jobs later this year because under the merger with Cendant, their jobs will duplicate those of existing Cendant personnel.

The deal started with an agreement by the Cheap Tickets board, announced Aug. 13, to sell the company to Cendant for the agreed price of $16.50 a share, or a total of about $425 million in cash. Cendant is not paying that much since Cheap Tickets has about $145 million in cash and assets that can be converted to cash. Its net cost is about $280 million, Cendant said.

With nearly half Cheap Tickets' shares already promised to it in that agreement, including the Hartleys' 47 percent holding, Cendant launched a public tender offer for the rest on Aug. 23. By the initial deadline of Sept. 21, Cendant had commitments for 86 percent of the shares. The offer was extended for two weeks, ending at midnight Friday.

Meanwhile, in a bigger deal, Cendant last Monday completed the acquisition of Galileo International Corp. for $1.8 billion in cash and shares. Galileo provided global distribution services for the travel industry through its computerized reservation systems and Internet services and distributed travel inventory to its travel agency and corporate customers.

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