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Cendant sells fleet unit to Avis
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May 24, 1999: 8:02 p.m. ET
No. 2 car renter to pay $1.8B, assume $3.2B in debt, for fleet management units
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NEW YORK (CNNfn) - Cendant Corp. has agreed to sell its fleet-management unit to Avis Rent A Car for $1.8 billion, the two companies said Monday.
The sale comes as part of Cendant's (CD) corporate restructuring, begun last December, to repair the damage done by huge accounting problems unveiled shortly after the company was formed by a merger in 1997.
All in all, Cendant has now trimmed around 20 percent of the company, judging by this year's revenue, Chairman and CEO Henry Silverman told the Moneyline News Hour with Lou Dobbs.
But this latest deal should be the end of the cuts, he said. "It's never easy to right-size your company when there's a human cost involved," Silverman explained. "We think we're getting our company easier for us to manage, easier for Wall Street to model."
Cendant wants to settle a class-action lawsuit with its common shareholders, Silverman said. It is trying to put financial shenanigans at its former subsidiary, CUC International, behind it. Its auditors say executives allegedly falsified about half a billion dollars in revenue.
"When some of our former partners are put in jail, that will give us an emotional lift, if not a financial one," Silverman said. But it was Cendant's stock that had a meltdown, not the company, he added.
On the plate in the deal announced Monday are Cendant's car-rental unit PHH Vehicle Management Services, which operates the corporate fleets for nearly a third of Fortune 500 companies, as well as its fleet units Cendant Business Answers -- Europe, Harpur Group Ltd. and Wright Express.
Avis will pay $1.44 billion cash and $360 million in preferred convertible stock for those units.
But perhaps more importantly, Avis -- in which Cendant owns a about a one-fifth stake -- will swallow about $3.2 billion in Cendant's debt, making the deal worth about $5 billion.
Saddled with accounting trouble nearly since its birth, Cendant emerged out of a December 1997 merger of the hospitality, real estate and rental company HFS -- Avis's former parent -- and CUC International, a direct marketer.
Garden City, N.Y.-based Avis (AVI) was spun off from HFS in late 1997, but Cendant still owns a 19 percent stake. The deal will let Cendant increase that stake to 34 percent.
The deal vaults Avis, the world's No. 2 car renter, into a top position in the vehicle leasing business, managing a fleet of about 900,000 cars, including 700,000 at PHH, and boosts Avis's presence in Europe.
Hertz (HRZ) is the industry leader.
Cendant is expected to record an after-tax gain of $750 million, with total proceeds seen at $1.7 billion.
Shares of Avis sank on the news, plunging 7-1/8 to 28-1/4, while Cendant (CD) edged up 3/8 to 19-9/16 in late trading Monday. 
-- from staff and wire reports
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