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Cendant Acquires Cheap Tickets

This week is starting with another sonic boom in the online travel sector as travel and real estate services company Cendant Corp. signed a deal to acquire discount airfare merchant Cheap Tickets Inc. in a stock deal valued at about $425 million.

However, New York City-based Cendant said that inasmuch as Honolulu-based Cheap Tickets has about $145 million in excess net cash and cash equivalents, the net purchase price is approximately $280 million.

Cheap tickets closed Friday at $11.85, so shareholders will get a premium of roughly 40 percent.

Cendant said it will integrate Cheap Tickets Internet operations into its soon-to-launch travel portal subsidiary, Travel Portal Inc. (TPI), and Cendant will provide TPI with call center and fulfillment services. TPI's lodging, timeshare, and rental car inventory clearly will mesh well with the Cheap Tickets operation.

Cendant said the acquisition is expected to add about 1 to 2 cents to its per-share earnings in 2002 and 3 cents in 2003. Cheap Tickets is an Internet and call center company that has actually made money; in fact it has been profitable every quarter starting in 1999.

For the six months ended June 1, revenues rose 5 percent to $53.4 million. Net income fell 67 percent to $2.4, reflecting an increase in advertising and technology related costs. Still, the EPS was 10 cents in the black for the six-months.

Most of Cheap Tickets business involves sales of discounted, non-published and published airline tickets both online and off. The site claims more than 3 million unique visitors per month. On average, Cheap Tickets says, it sells one ticket every 10.5 seconds.

The company was founded in 1986 as a traditional travel agency and since launched its Web site in October 1997.

Cendant said its combined leisure travel agency business in the United States now is expected to reach $1.6 billion in annual gross travel bookings and 5.1 million transactions.

"Cheap Tickets is unique among its principal competitors in that it is successful in both online and off-line markets," said Cendant Chairman, President and CEO Henry R. Silverman. "The acquisition of Cheap Tickets supports our strategy of further penetrating the fee-for-service components of the travel industry."

As announced in June, Cendant also is acquiring Rosemont, Ill.-based Galileo International Inc. , a provider of electronic global distribution services for the travel industry utilizing a computerized reservation system. That deal, valued at about $2.9 billion, is expected to close sometime in the third quarter. It is being reviewed by European regulators, but Cendant has said it is confident the acquisition will go through.



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