Cendant to shed software business Publishing unit also will be sold

shares rise 14%

Marketing

August 13, 1998|By BLOOMBERG NEWS

PARSIPPANY, N.J. -- Cendant Corp. said yesterday that it has hired Credit Suisse First Boston to sell its consumer software business and has agreed to sell an Internet publishing unit for about $510 million in cash and stock.

The company said its software group, one of the world's largest makers of personal computer programs for consumers, could be sold in an initial public offering or to a third party. Two of its parts, Sierra On-Line Inc. and Davidson & Associates Inc., were acquired two years ago for $1.9 billion in stock.

Cendant said managers of its Hebdo Mag International publishing unit will pay 7 million shares of Cendant stock and $410 million in cash for their company, which distributes classified advertising information in 14 countries.

The planned transactions are the strongest signs that Cendant Chairman Henry Silverman is proceeding with plans to sell parts of the sprawling marketing company he built through acquisitions. In a news release, Silverman said the units don't "fit within our future business model" and that selling them would "further sharpen our company's focus."

Last month, he said Cendant would become a "net seller of businesses."

Cendant, which owns Coldwell Banker real estate and Howard Johnson hotels, is trying to gain investor confidence after announcing that accounting fraud would force it to restate earnings for the past three years.

Investors applauded the plans, sending Cendant shares up $2, or 14 percent, to $16.125 in trading of 9.8 million shares, making ++ it the 11th-most-active U.S. stock. The increase was the biggest one-day gain in Cendant's eight-month history.

"The speed with which Cendant reached an agreement to divest Hebdo Mag was quite encouraging, and obviously the market likes it," said Rob Nicoski, an analyst at Minneapolis-based Piper Jaffray Inc. Silverman "knows what he needs to do, and he's doing it in a hurry." Nicoski added.

Both units will be treated as discontinued operations in the revised financial statements expected to be released this week. Cendant is restating its earnings because of fraud and accounting errors in its discount-shopping clubs and other membership based businesses.

Cendant had lost 66 percent of its value from early April, before its accounting regularities began to surface, until yesterday.

Separately, Cendant gained approval from shareholders of United Kingdom-based RAC Holdings Ltd. to buy its roadside assistance unit, RAC Motoring Services, for 450 million pounds ($732 million). Completing the purchase may help Cendant show investors that it's recovering from its accounting woes, analysts said.

The company is using bank financing to pay for the purchase of RAC Motoring. Cendant also plans to buy Miami-based credit insurer American Bankers Insurance Group Inc. for about $3 billion, using a cash tender offer for 51 percent of the price and buying the rest with Cendant stock.

Cendant said it needs approval from the United Kingdom's Office of Fair Trading before it can complete its RAC Motoring acquisition.

The company is cooperating with investigations by the Securities and Exchange Commission and the U.S. attorney in Newark, N.J.

Walter Forbes, who resigned as Cendant chairman last month, was expected yesterday to turn over records of more than $1 million in travel and entertainment expenses he charged to the company. Forbes founded and ran CUC International Inc., one of two companies that merged to form Cendant last year and in which the fraud occurred.

Pub Date: 8/13/98

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