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Cendant readies spin-off
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October 25, 2000: 7:03 p.m. ET
Company plans to shed former CUC businesses from core operations
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NEW YORK (CNNfn) - Cendant Corp. plans to spin off its individual membership business to shareholders, shedding assets previously under the control of troubled CUC International.
Cendant (CD: Research, Estimates), which owns the brand names for such diverse franchises as Days Inn and Ramada hotels to Century 21 and Avis Group, said it is distributing 100 percent of the its membership businesses to help those units grow and reduce a drain on Cendant's financial results due to accounting procedures.
 Cendant's membership businesses, such as Travelers Advantage and AutoVantage provide services, information, assistance and discounts to customers who pay a fee.
The new company, which has not been named, will consist primarily of Cendant Membership Services, which is headquartered in Stamford, Conn., and Cendant Services of Richmond, Va.
Both were run by CUC International, which merged with HFS Inc. in 1997 to form Cendant. In December 1999 the company had to pay $2.83 billion to settle a class action lawsuit stemming from CUC accounting irregularities. Three CUC executives later pled guilty to cooking the company's books.
Henry Silverman, Cendant chairman, president and CEO, said in a statement the membership services accounting practices are hurting Cendant's share performance.
"Unfortunately, the conservative accounting methods required for this business prevent us form recording the revenue produced by the marketing until more than one year following our receipt of the cash membership fees," Silverman said in the statement. "The expense of this marketing, however, is largely recorded up front. As a result, growth results in volatile and, initially, significantly lower GAAP earnings."
The company expense to spin off the units by mid-2001.
Shares of Cendant fell 25 cents to $9.75 on the New York Stock Exchange. 
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Cendant
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