Cendant: $1.1B for Gullivers

NEW YORK - Cendant agreed to acquire U.K.-based wholesaler Gullivers Travel Associates for $1.1 billion in cash, "essentially completing a trifecta in travel distribution."

That's how Cendant Chief Financial Officer Ronald Nelson characterized the travel and real estate company's recent acquisition binge.

That buying spree includes the pending purchase of eBookers and the recently completed Orbitz buy. The Gullivers deal is expected to close in April.

The three purchases give Cendant major footholds as an intermediary in the U.S., Europe and Asia as well as a strong presence as a wholesaler.

The total tab: $2.5 billion in round numbers.

Cendant's price for Gullivers, which includes retail arm OctopusTravel.com and USTOA member Travel Bound, comes to $1.1 billion in cash plus future considerations. The price tags on eBookers and Orbitz were $329.6 million and $1.25 billion, respectively.

In travel, Cendant is done buying for now, officials said, except for a smaller hospitality purchase or two.

Cendant Chairman and CEO Henry Silverman said the Gullivers purchase is the "final building block" in the company's strategy of becoming a global travel intermediary, with "order maker/order taker" capabilities. The game plan came together "faster than we anticipated," Silverman added.

The company also owns Galileo, Avis, Budget and eight hotel brands.

The travel acquisitions reflect Cendant's desire to focus on two core lines of business: travel and real estate. Cendant intends to fund the Gullivers purchase by spinning off Cendant's Wright Express unit in an IPO in February or March.

Founded in 1975 and employing 2,400 people, Gullivers is a global wholesaler of hotels, destination services, packages and group tours. Although it sells in Europe and throughout the world, Gullivers largest outbound market - where travel is sold - is Asia, including Japan and China.

Online travel is growing fastest in Asia, and the Gullivers purchase "gives us immediate access to markets that are notoriously difficult to penetrate," Silverman said.

Gullivers and its OctopusTravel.com consumer Web site have merchant relationships with 21,400 properties - many of them independents - and Cendant intends to leverage that inventory for cross-selling through Orbitz, Cheap Tickets, Lodging.com and eBookers.

With Gullivers in the fold, Cendant's merchant-hotel portfolio will be similar to IAC/InterActive-Corp's, Silverman said.

With those key merchant hotel deals and their ample margins, Cendant also will become less reliant on air sales, Nelson added.

Cendant has pursued privately owned Gullivers "for some time," Silverman said, adding Gullivers has had a relationship for more than two years with Cendant's HotelClub.com and Lodging.com.

Key managers at Gullivers, including Chairman David Babai, are expected to remain with the company, Cendant said.

Cendant officials declined to furnish precise figures about OctopusTravel but said it constitutes 30% to 40% of Gullivers' business. Cendant expects Gullivers' contribution to Cendant to be $1 billion to $1.2 billion in gross sales in 2005 and $1.6 billion to $1.8 billion in 2006.

"This is a major acquisition in terms of distribution, content and access points," said Lorraine Sileo, PhoCusWright's vice president of information services. "It certainly enhances Cendant's competitive position."