RealTime IT News

Cendant Seals $1.25B Orbitz Buy

Amid rising use of online travel services, Cendant will pay $1.25 billion in cash for Orbitz , the companies confirmed this morning.

The deal represents a 32 percent premium over Orbitz's Tuesday closing price and is expected to close in November, pending regulatory approval.

Once completed, the online travel business will become part of Cendant's travel distribution services unit, which includes the Web properties CheapTickets and Travelport.

Cendant is best known as the owner of Day's Inn hotel chain and Avis car rental, businesses it believes will benefit from the greater exposure through Orbitz.

"[The acquisition] immediately places Cendant in a leading competitive position in the domestic online travel distribution business," Samuel L. Katz, CEO of Cendant's travel distribution services division, said in a statement.

The move will create $65 million of synergies in 2005 and $120 million in 2006, Cendant said. But that doesn't mean Orbitz and Cendant brands will be combined.

Cendant will keep both the Orbitz and CheapTickets businesses for the consumer travel sector. On the corporate travel side, customers will also be able to choose between Travelport and Orbitz.

Integration plans are focused on the back end. CheapTickets and Travelport will combine technology and operations to form a common platform with Orbitz, based in Chicago. Cendant also owns Galileo International, a travel data service that tracks prices and schedules which could see technology and information sharing with Orbitz.

The Orbitz deal is the latest in a consolidating sector. Orbitz's main competitors have already been snapped up -- Expedia by InterActiveCorp and Travelocity by Sabre.

The buying sprees come as a recent study by the Travel Industry Association of America shows growing reliance on the Internet for travel planning and booking.

In the last year, nearly 64 million Americans went online for travel and destination information. Of those, 44 million booked at least one reservation (flight, hotel, car rental), up 6 percent from a year ago, the TIAA found.

Additionally, the survey revealed that the number of consumers that do all their travel booking online has hit 40 percent, versus 29 percent a year ago.

"The tremendous increase in travelers booking all their travel online signifies a major shift in consumer preference when it comes to planning and booking travel," Suzanne Cook, TIAA's senior vice president of research, said in the report.