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.
