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Cendant, ABI reach pact
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March 23, 1998: 4:28 p.m. ET
Former hostile suitor wins insurer for $3.1B; also buys UK firm for $1.3 B
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NEW YORK (CNNfn) - Cendant Corp., the fast growing marketing giant created from the $13 billion merger between CUC International and HFS Inc., is continuing with its string of acquisitions.
After months of scorn battling American International Group (AIG), Cendant Corp. has won over American Bankers Insurance Group Inc. and hammered out a $3.1 billion acquisition, the two insurance marketing companies said Monday.
In addition, Parsippany, N.J.-based Cendant agreed to acquire National Parking Corp. Ltd. of Great Britain for 673 pence a share, or a total of about 801 million pounds ($1.3 billion) in cash.
The acquisitions are expected to add approximately 4 cents a share to 1998 operating earnings and approximately 8 cents in 1999, analysts said.
"I'm comfortable with the sell-side's projections," said Henry Silverman, president and chief executive of Cendant.
Silverman discussed the impact of the deals with investors during a Monday morning conference call. Of the two transactions, the National Parking deal attracted more attention from investors despite the highly publicized battle for American Bankers.
National Parking operates in two principal segments: National Car Parks Ltd., the largest private car park operator in the U.K. with approximately 500 locations, and Green Flag Group Ltd., the largest for-profit roadside assistance organization, with more than 3.5 million members in the U.K.
The two operating subsidiaries had been planning a demerger prior to the agreement with Cendant. Silverman said the operations represent an excellent strategic fit, particularly with Cendant's U.K.-based PHH unit, which provides accident services for corporate fleets and claims handling for major auto insurers.
It is anticipated that Robert D. Mackenzie will remain chief executive of National Parking following the acquisition.
The Turning Point
As for the American Bankers (ABI) transaction, the agreement represented a significant conciliation for Cendant and insurance giant AIG, which at one point in the heated battle canceled a liability policy covering Cendant's officers and directors.
"We were a very big customer," Silverman said during a telephone interview.
On Dec. 22, AIG agreed to acquire ABI for $2.2 billion, or $47 a share. But the bid was challenged by Cendant, which began a $2.7-billion tender offer in late January for ABI shares at $58 a share. AIG later matched the Cendant offer; however, Cendant was able to raise its bid after ABI finally granted permission for Silverman's team to conduct a due diligence review on March 6.
"I think the turning point was when their board leveled the playing field," he said.
"We did wage a very effective campaign to put pressure on the ABI board to do the right thing ... These contests are won or lost by how many mistakes you make. We didn't make any mistakes," Silverman said.
Under the definitive merger agreement, Cendant will acquire American Bankers of Miami for cash and stock valued at $67 a share. About 23.5 million ABI shares will be bought through Cendant's pending cash tender offer. Cendant will purchase the remaining shares with stock. Meanwhile, each ABI $3.125 series B convertible preferred share will be converted into one Cendant series A preferred share.
As part of the agreement, American Bankers will pay AIG a termination fee of $100 million. Cendant will pay an additional $5 million for merger-related expenses and an additional $5 million at the closing of the transaction. In addition, all lawsuits among the parties will be dropped.
Cendant said it already has received antitrust clearance to acquire American Bankers. The tender offer is subject to the receipt of tenders representing at least 51 percent of the common shares of American Bankers as well as customary closing conditions, including regulatory approvals.
American Bankers will schedule shareholder meetings to vote on the merger with Cendant as soon as practicable. The transaction is expected to be completed near the end of the second quarter.
"We determined that it would not have been in AIG's best interests to raise our proposal above $58 per share," said Maurice Greenberg, AIG's chairman and chief executive.
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