CUC, HFS in $11B deal
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May 27, 1997: 9:28 p.m. ET
No layoffs, office closings planned; new firm to have $22B market cap
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NEW YORK (CNNfn) - Direct marketer CUC International Inc. and hotel franchiser HFS Inc. said Tuesday they plan to merge in an $11 billion stock swap that would create a consumer- and business-services company with a market capitalization of $22 billion.
While the companies aren't household names, their products and services certainly are.
The combined company will unite HFS' Avis car rental unit, Coldwell Banker and Century 21 realtors, and Days Inn, Howard Johnson and Ramada hotels with CUC's Shoppers Advantage and Travelers Advantage member services, Welcome Wagon and Sierra On-line software makers.
The new business will have revenues of approximately $4.3 billion and net income of nearly $600 million. The companies do not expect to cut any workers because of the deal.
The transaction will be accounted for as a pooling of interests.
HFS Chairman Walter Forbes "likes to say
CUC's mission is to sell everything to everyone everywhere," CUC Chairman Henry Silverman said Tuesday on "Moneyline with Lou Dobbs." "We frankly have more 'everyones' everywhere than anyone else in the world.
HFS has been on a growth spurt, merging less than a month ago with PHH Corp., a provider of vehicle-leasing and fleet-management services. HFS bought Avis for $800 million last July and Value Rent-A-Car for $175 million in March.
HFS is also involved in Hilton Hotels Corp.'s battle for control of ITT Corp. HFS made no reference to the Hilton-ITT matter, but Hilton said Tuesday's deal "did not appear" to alter HFS' role in the ITT bid.
Under terms of their agreement, if Hilton succeeds in acquiring ITT, Hilton would license the Sheraton name to HFS.
"This is a very long-term, very compelling example of a very sustainable long-term growth rate which should enhance shareholder value for our combined company for years and years to come," Silverman said about today's deal.
Forbes, appearing with Silverman on "Moneyline," played up the financial might of the combination. "We really don't have much competition. On a worldwide basis, there is really no company like the combination we're putting together," he said.
Under the proposed terms, Silverman will serve as president and chief executive of the new company. Forbes will be chairman of the board. On, Jan. 1, 2000, the two men will switch jobs.
Both companies will continue their operations in Parsippany, N.J., New York City and Stamford, Conn. Each location will house small corporate headquarters staffs.
The new company will be named when the deal closes this fall. Under the agreement, 2.4031 shares of CUC stock will be exchanged for each share of HFS stock.
Both companies' boards of directors unanimously approved the deal, which still needs shareholder approval.
Following the merger announcement, which came after the market's close, HFS rose 1-1/2 to 60, while CUC fell 3/4 to 25-1/4 in after-hours trading.
--Will Morton
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