Travel and reservation franchising company Cendant Corp. said today that it will buy Galileo International Inc., the second-largest computerized travel reservations company, for US$2.9 billion in cash and stocks.
In a statement, New York-based Cendant said it will pay cash and stock worth $33 for each Galileo share. In addition, Cendant will assume $600 million in debt. The transaction is expected to close this fall after approval by Galileo shareholders and federal regulators. The acquisition is expected to add 10 cents to 14 cents per share to Cendant's 2002 earnings, Cendant said.
The news comes 10 days after the two companies confirmed that they were in merger talks.
The deal is expected to boost Cendant's travel services business and position it as a direct competitor against Fort Worth, Texas-based Sabre Holdings Corp., the No. 1 computerized travel reservations company.
"Galileo's technology expertise and Internet capabilities will accelerate Cendant's ability to take advantage of the growth in online travel bookings," said Samuel Katz, Cendant's chief strategic officer, in the statement.
Cendant currently owns the hotel chains Ramada, Days Inn and Super 8, as well as rental car company Avis Group Holdings Inc. It also owns WizCom, a global provider of electronic reservations processing and information management systems for the travel industry.
Galileo, based in Rosemont, Ill., said it has access to approximately 500 airlines, 40 car rental companies and 45,000 hotel properties worldwide. Galileo processes 92 billion transactions annually through its reservation system and has locations in 107 countries. The company, which has had to compete against the continuing shift toward online ticketing sites, reported sales of $1.64 billion in 2000 and put itself up for sale in October.
Galileo's biggest shareholder, United Air Lines Inc., which has an 18 percent stake in the company, has agreed to support the acquisition, the companies said.
Kate Rice, an analyst at online travel research firm PhoCusWright Inc. in Sherman, Conn., said the deal makes sense for Galileo, since it was in trouble financially and wanted to be bought.
"And Cendant, which is mainly a travel supplier, can expand in a business it already has more than a toehold in with WizCom," she said.