Filed by Cendant Corporation
Commission File No. 1-10308
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Galileo International, Inc.
Commission File No. 1-13153
This document is being filed pursuant to Rule 425 under the Securities Act
of 1933 and is deemed filed pursuant to Rule 14a-12 under the Securities
Exchange Act of 1934.
CENDANT TO ACQUIRE GALILEO FOR APPROXIMATELY $2.9 BILLION IN STOCK AND CASH
Acquisition Expected to Add $0.10 to $0.14 Cents to
Cendant's 2002 Earnings Per Share
Combination Extends Cendant's Global Platform To Include Full
Range of Services in Travel Sector
New York, NY and Rosemont, IL, June 18, 2001--Cendant Corporation (NYSE:
CD) and Galileo International, Inc. (NYSE: GLC) today announced that they
have signed a definitive agreement for Cendant to acquire all of the
outstanding common stock of Galileo at an expected value of $33 per share,
or approximately $2.9 billion. Cendant will also assume approximately $600
million of Galileo net debt. For the year ended December 2000, Galileo
reported revenues of $1.64 billion and EBITDA of approximately $570
million. The transaction will combine Galileo, one of the leading providers
of electronic global distribution services (GDS) for the travel industry,
with Cendant, a diversified global provider of business and consumer
services, with a significant presence in the travel sector. The
transaction, which is expected to close in the fall of 2001, is subject to
customary regulatory approvals and the approval of Galileo's stockholders.
United Air Lines, Inc. (UAL), the largest stockholder of Galileo with
approximately 18% of the outstanding shares, has entered into an agreement
with Cendant to support the transaction and has provided Cendant with a
proxy to vote the Galileo shares owned by UAL in favor of the transaction.
Under the terms of the agreement, Galileo stockholders will receive a
combination of Cendant common stock and cash with an expected value of $33
per Galileo share. Galileo stockholders will receive 80.5 percent or more
of the purchase price through a tax-free exchange of Cendant common stock
with a market value of $26.565 per Galileo share, subject to a collar. The
number of shares will fluctuate within a collar of $17 to $20 per Cendant
share from 1.563 Cendant shares per Galileo share if the average price of
Cendant shares is $17 per share during the measurement period to 1.328
Cendant shares per Galileo share if the average price per Cendant share is
$20 during the measurement period. Therefore, the total number of Cendant
shares to be issued will be between 116 million and 137 million shares. If
the average price per share of Cendant stock during the measurement period
is below or above the collar, the value of the transaction will be greater
or less than $33 per Galileo share since the exchange ratios, as noted
above, are fixed for stock consideration outside the collar. For purposes
of determining the exchange ratio, the exchange ratio will be based on the
average Cendant stock price for the period of 20 trading days preceding the
third trading day prior to the Galileo stockholder meeting to approve this
transaction (measurement period). Under certain circumstances, if the
closing of the transaction has not been consummated within 30 days of the
Galileo stockholders meeting a 20-day measurement period closer to the
actual closing will be used.
The remainder of the purchase price, up to $6.435 per Galileo share or
approximately $562 million in the aggregate, will be paid in cash. The cash
portion of the consideration is limited to 19.5 percent of the value of the
total consideration on the closing date to be paid to Galileo stockholders.
The effect of the 19.5 percent limitation is that the cash portion of the
consideration will be reduced if it ever exceeds 19.5 percent of the value
of the total consideration on the closing date to be paid to Galileo
stockholders. This limitation is intended to preserve the tax-free nature
of the stock portion of the consideration being paid to Galileo
stockholders.
If the average Cendant stock price per share is at or below $14 over a
20-day trading period preceding the third trading day prior to the Galileo
stockholder meeting to approve this transaction, Galileo will have a right
to terminate the transaction. Under certain circumstances, if the closing
of the transaction has not been consummated within 30 days of the Galileo
stockholders meeting a 20-day measurement period closer to the actual
closing will be used.
Cendant expects that the acquisition of Galileo will be immediately
accretive to Cendant's earnings and cash flow. The Company expects Galileo
to add between $0.10 and $0.14 cents to Cendant's 2002 earnings per share,
depending upon the number of shares issued, the closing date of the
acquisition and the timing of achieving certain synergies. Included in the
projected accretion is about $70 million to $80 million of merger synergies
in 2002, primarily from the utilization of Galileo's GDS by Cendant's
travel agency and its travel portal affiliate, the reduction of certain
information technology spending, and the reduction of general and
administrative expenses. The synergies are anticipated to grow to over $100
million in 2003. The transaction is expected to increase Cendant's free
cash flow by about $350 million to $400 million in 2002.
The acquisition is also expected to significantly enhance Cendant's growth
prospects in the rapidly expanding global market for travel services, for
several reasons:
o Cendant, a leader in road-based travel, will now be able to generate
transaction fees from air travel, the largest component of travel
spending;
o Galileo will diversify Cendant's travel revenue base geographically
with no foreign currency risk, as over 60% of Galileo's revenues come
from faster-growing international markets but are paid in U.S.
dollars;
o Cendant's worldwide customer base will expand significantly, giving
Cendant greater opportunity to market its Preferred Alliance services
to Galileo-connected travel agencies in 43,000 locations around the
world. Cendant's Preferred Alliance business has built relationships
with more than 100 world-class companies that provide its customers
with exceptional prices on high quality products and services such as
long distance phone service, insurance, computers, furniture and other
office products;
o Cendant's existing membership travel businesses will utilize Galileo's
GDS service and Cendant's extensive network of travel Web sites will
also use Galileo's GDS service to book non Cendant-branded services
such as airline tickets;
o Galileo's TRIP.com with its technological capabilities will enhance
the capabilities of Cendant's comprehensive travel portal affiliate,
reducing its cost of operation and allowing it to capitalize on the
growth in online travel bookings.
Henry R. Silverman, Cendant's Chairman, President and Chief Executive
Officer, said, "This combination will create attractive new growth
opportunities for stockholders of both companies because it substantially
broadens the range of our service offerings and our geographic reach. The
global travel industry is benefiting from favorable demographic trends in
the U.S. and strong international growth. Galileo's fee-for-services
business model, customer relationships and customer base are highly
complementary to Cendant's. Galileo's major presence in air travel bookings
and substantial international reach are an excellent strategic fit with
Cendant and will facilitate our ability to capitalize on future growth
opportunities within the travel industry."
Galileo's Chairman, President and Chief Executive Officer, James E.
Barlett, said, "Galileo's experience in managing a vast global network and
providing innovative technology solutions is an ideal strategic fit with
Cendant's core competencies of providing business and consumer services.
The two companies together will be able to provide large corporations,
small businesses, travel agencies and individual consumers around the world
with the broadest possible range of travel services. Galileo's extensive
international infrastructure will also enable Cendant to more easily take
advantage of attractive diversification opportunities in global travel
markets."
Cendant's Chief Strategic Officer, Samuel L. Katz, said, "Galileo's
technology expertise and Internet capabilities will accelerate Cendant's
ability to take advantage of the growth in online travel bookings.
Cendant's initiative to develop a comprehensive travel portal will now be
combined with Galileo's TRIP.com, providing us with superior technology, a
world-class URL and lower cost of operations. Substantially enhanced
distribution of Cendant's travel brands in the online space is an example
of the virtuous circle this transaction creates for our travel businesses.
Within this virtuous circle, we expect to build on Cendant's core
competencies to strengthen the businesses of our distribution customers
while creating additional value for our supplier partners."
To maintain the highest service levels to Galileo's customers and
suppliers, the Companies have agreed to work together during the period
prior to closing to assure a seamless integration of Galileo into Cendant
after closing. Therefore, Cendant does not anticipate changes in Galileo's
operational management or a reduction in the employee base that would
impact service to customers.
Following the closing of the transaction, Galileo's CEO, James E. Barlett,
has decided to pursue other opportunities outside of Cendant.
Mr. Silverman said, "We are going to bring in a new CEO, similar to when we
brought Bob Pittman into Century 21 to change the paradigm of that company,
who together with a number of current Cendant managers will augment
Galileo's operational management team. We have a long history of
revitalizing companies, and we're confident we can do it again."
The merger agreement requires, among other things, that Galileo suspend
payment of its regular quarterly cash dividend and terminate its $250
million stock repurchase program. Galileo declared and paid a dividend of
$0.09 per share to its stockholders during each of the first and second
quarters of 2001. As of May 31, 2001, Galileo had repurchased approximately
$71 million in shares of its common stock under the stock repurchase
program, which was authorized by the Board of Directors in April 2000.
JPMorgan acted as the exclusive financial advisor to the Board of Directors
of Galileo. Salomon Smith Barney acted as a financial advisor to Cendant.
Cendant will host a conference call to discuss its acquisition of Galileo
on Monday, June 18, 2001 at 10:30 a.m. (EDT). Individuals dialing into the
conference call at (913) 981-4911 are encouraged to do so beginning at
10:15 a.m. as the call will begin promptly at 10:30 a.m. The conference
call will also be available through a live Webcast at www.cendant.com. To
access the call online, go to the Investor Center portion of
www.cendant.com prior to the call to install the necessary audio software.
A replay of the call will be available from June 18, 2001 at 1:00 p.m.
(EDT) until June 20, 2001 at 6:00 p.m. (EDT). The replay phone number and
access code are (719) 457-0820 and 716332, respectively.
Galileo will host a conference call to discuss its acquisition by Cendant
on Monday, June 18, 2001 at 12 noon (EDT). To access the call, investors
should dial (703) 871-3086. The conference call will also be available
through a live Webcast at www.Galileo.com/investor/webcast. To access the
Webcast, your computer must have RealPlayer software installed. A replay of
the call will be available from June 18, 2001 at 3:00 p.m. (EDT) until June
22, 2001 at 11:59 a.m. (EDT). The replay phone number and access code are
(703) 925-2533 and 5326412, respectively. The Webcast will be archived for
those who would like to listen at a later time.
About Galileo
Galileo is a leading provider of electronic global distribution services
(GDS) for the travel industry through its computerized reservation systems
and its Internet-based solutions, including its online travel service
TRIP.com. The company's systems connect more than 43,000 travel agency
locations, which serve the needs of millions of corporate and individual
travelers, to approximately 500 airlines, 40 car rental companies, 45,000
hotel properties, 360 tour operators and all major cruise lines throughout
the world.
About Cendant
Cendant is a diversified global provider of business and consumer services
primarily within the real estate and travel sectors. The Company's
fee-for-service businesses include hotel, real estate and tax preparation
franchising; rental cars, fleet leasing and fuel cards; mortgage
origination and employee relocation; customer loyalty programs; vacation
exchange and rental services and vacation interval sales. Other business
units include the UK's largest private car park operator and electronic
reservations processing for the travel industry. With headquarters in New
York City, the Company has approximately 60,000 employees and operates in
over 100 countries.
Statements about future results made in this release constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations and the current economic environment. Each of Cendant and
Galileo cautions that these statements are not guarantees of future
performance. Actual results may differ materially from those expressed or
implied in the forward-looking statements. Important assumptions and other
important factors that could cause actual results to differ materially from
those in the forward-looking statements are specified in Cendant's Form
10-Q for the quarter ended March 31, 2001 and Galileo's Form 10-K for its
year ended December 31, 2000. References to accretion concerning Cendant in
this press release assume that the Financial Accounting Standards Board's
(FASB) proposed changes in GAAP for goodwill amortization become effective.
In addition, such forward looking statements are based upon many estimates
and are inherently subject to significant economic and competitive
uncertainties and contingencies, including the uncertainty regarding
consummating any possible acquisition of Galileo International, Inc., many
of which are beyond the control of management of Cendant, Galileo and their
affiliates. Accordingly, actual results may be materially higher or lower
than those projected. The inclusion of such statements herein should not be
regarded as a representation by Cendant, Galileo or their affiliates that
the statements will prove to be correct.
This press release is being filed pursuant to Rule 425 under the Securities
Act of 1933 and is deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934.
Cendant and Galileo will file a proxy statement/prospectus and other
relevant documents concerning the proposed merger transaction with the SEC.
Investors are urged to read the proxy statement/prospectus when it becomes
available and any other relevant documents filed with the SEC because they
will contain important information on the proposed transaction. You will be
able to obtain the documents filed with the SEC free of charge at the Web
site maintained by the SEC at www.sec.gov. In addition, you may obtain
documents filed with the SEC by Galileo free of charge by requesting them
in writing from Galileo, 9700 West Higgins Road, Suite 400, Rosemont, Ill,
60018 Attention: Investor Relations, or by telephone at (847) 518-4000.
Galileo and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from Galileo's stockholders. A
list of the names of those directors and executive officers and
descriptions of their interests in Galileo is contained in Galileo's proxy
statement dated April 3, 2001, which is filed with the SEC. Stockholders
may obtain additional information about the interests of the directors and
executive officers in this transaction by reading the proxy
statement/prospectus when it becomes available.
Cendant Media Contact: Cendant Investor Contacts:
Elliot Bloom Sam Levenson
212-413-1832 212-413-1834
Denise Gillen
212-413-1833
Galileo Media Contact: Galileo Investor Contact:
Andrea Steffy Tammy Bobbitt
847-518-4973 847-518-4771
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