News > Deals
Cendant scraps ABI deal
October 13, 1998: 6:33 p.m. ET

Marketing firm will pay ABI $400M to cancel merger; plans $1B stock buyback
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NEW YORK (CNNfn) - Under pressure to retire outstanding debt, marketing giant Cendant Corp. on Tuesday agreed to pay American Bankers Insurance Group Inc. $400 million to terminate their planned merger. Cendant also announced plans to repurchase $1 billion of its common shares on the open market.
     With the termination, Parsippany, N.J.-based Cendant -- the offspring of last year's merger of discount services provider CUC and hospitality franchiser HFS -- said its "principal financial goals" would be to retire a $3.25 billion outstanding bank loan and launch the buyback program.
     Cendant said it would take an after-tax charge of $280 million to settle with ABI and pay associated expenses. The company will retire the remainder of its debt from proceeds from intermediate and long-term debt issues and finance the share repurchase with cash and proceeds from previous asset sales.
     Cendant's termination of its $3.1 billion ABI buyout comes less than seven months after the company edged out American International Group in a bruising bidding war.
     Henry Silverman, Cendant's chairman, president and chief executive officer, said in a statement that the merger cancellation would resolve uncertainty among investors.
     "After today," Silverman said, "our only material uncompleted acquisition is our $750 million acquisition of RAC Motor Services of the U.K., which we plan to complete in 1999."
     Cendant added that it could draw on $1.8 billion in undrawn bank credit facilities, about $1 billion in cash, net of the payment to ABI, and "significant internally generated annual free cash flow".
     Cendant business interests in real estate include Century 21 and Coldwell Banker, as well as the Days Inn, Howard Johnson and Ramada hotel chains. The company reported sales of $5.3 billion in 1997. More recently, however, the company has been buffeted by an accounting scandal at the former CUC.
     Cendant shares ended up 1-3/8 at 11 Tuesday on the New York Stock Exchange.Back to top


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