Special Situation Investing

Thursday, August 10, 2006

Cendant (CD) Up for Sale?

Cendant announced today in a conference call that it will consider selling itself, or either of it's 2
recently spun-off companies, Realogy (H) and Wyndham (WYN), if the right price came their way. This should come as no surprise, Cendant is in the process of finalizing it's sale of it's Travelport business to private investors.

For general information on the Cendant spin-off click here and here.

What makes the company interesting from a special situations perspective is that the company's executives have substantial equity interests in the various Cendant
entities. For instance, the CEO is listed as owning 9.3 million shares pre-spinoff (at current prices, the 3 divisions are worth about ~$12.50 a share, which puts his piece of the pie at $116 million) and seem intent on maximizing their value through whatever means available. While I applaud the approach, their numbers would make me question the inherent quality of the
underlying businesses. Just be aware that if a sale does not go through it could take
some time to realize the underlying value discount and results could deteriorate while you are waiting.

Cendant closed down at $1.89 on the news.


  • This comment has been removed by a blog administrator.

    By Blogger HarperAssetMgmt, at 1:34 PM  

  • Realogy is a steal...mgmt obviously agrees as they are buying back 19% of shares outstanding. This is by far the best business of the former Cendant co's, and is selling at the lowest valuation of the three spins. Housing market fears have resulted in a bargain price.

    By Blogger HarperAssetMgmt, at 1:42 PM  

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