Special Situation Investing

Wednesday, August 09, 2006

Cendant (CD) Spinoff

Cendant completed the spinoffs of it's real estate division (Realogy R) and hospitality division (Wyndhan WYN) about a week ago. It has also announced the sale of it's Travelport business for $4.3 Billion has received antitrust approval.

Post spin-off analysis:

CD was originally selling for $15-19 billion in the 52 weeks pre-spinoff. Currently, the sum of the parts goes for about $12.30 billion, divided as follows:

CD - ~1 billion shares * $1.99 = $1.91 billion

WYN - 200 million shares * $26.07 = $5.21 billion

H - 250 million shares * $20.72 = $5.18 billion

= $12.3 billion

For spinoff junkies this might be worth looking at.

Cendant also announced it's latest and final quartely results with all divisions included. From this point onwards, "Cendant" is really Avis/Budget rent-a-car. The results were less than expected, revenue up 2% and EPS from continuing operations of $.17 or $170 million including restructuring costs.

Now I am not advocating Cendant but you might want to keep an eye on it. In it's new form (as a car rental company) it is selling for $1.99 billion with expected revenue of $5.6 billion. Earnings are likely to be weak as EBITDA is predicted to be $260-295 million. Digging through some statements it looks like actual earnings will be less than $100 million for a steep P/E of 19+. However there are restructuring results included in those numbers and they are getting hit hard by the increase in interest rates. Consider that Dollar Thrifty (DTG) has revenue of ~$1.55 billion and a market cap of $1.02 billion for a P/S of .66 compared to Cendants P/S of .34. There is similar debt levels between the 2 companies.


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