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Cendant May Buy Orbitz Website

The $1.2-billion deal for the travel site would provide a cash infusion to the five airlines that helped found it.

September 29, 2004|From Reuters

Travel and real estate company Cendant Corp. is close to an agreement to buy online travel site Orbitz Inc. for about $1.2 billion in cash, a source close to the talks said Tuesday.

In a deal that could be announced as early as this morning, Orbitz would change hands for about $28 a share, a 35% premium to its closing share price of $20.77 on Tuesday on Nasdaq.

Both companies' boards of directors were to meet Tuesday evening to consider approval of the deal, the source said.

Orbitz's share price jumped nearly 20% in after-hours trading after the story was first reported in the New York Times.

Orbitz was founded in February 2000 by American, United, Delta, Northwest and Continental airlines.

Each of the air carriers -- the five largest in the United States -- still holds a stake in Orbitz, although they all sold large chunks of their stock as part of Orbitz's initial public offering in December 2003.

The airlines, whose businesses had started to slump even before the Sept. 11, 2001, terrorist attacks, still are trying to rebuild in the face of a wavering economy and record-high fuel prices, and could use the quick injection of cash a sale of Orbitz would yield.

The site was founded as a rival to No. 1 travel site Expedia, a unit of InterActiveCorp, and No. 2 site Travelocity, a unit of Sabre Holdings Corp.

By owning their own travel portal, the airlines were attempting to cut back on the costs of selling and distributing tickets, and to avoid paying other travel agents.

Analysts now predict, however, that a drop in transaction fees paid by the airlines could hurt Orbitz, along with fierce competition from Expedia and Travelocity.

New York-based Cendant already owns Galileo International Inc., a computerized reservation system used by travel agents. Cendant's wide range of brands also includes Avis Rent A Car, Days Inn and Century 21 Real Estate.

A spokeswoman for Orbitz had no comment. Cendant was not immediately available to comment.

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