Orbitz shares surge on news of Cendant deal

CHICAGO — Orbitz Inc.'s shares surged nearly 31 percent Wednesday on news that Cendant Corp., the owner of the CheapTickets, Days Inn, Avis and Budget brands, had agreed to pay $1.25 billion to acquire the third-largest online travel agency.

Cendant, a hotel franchisor and real estate service company, said the deal would expand its Internet presence in the growing online travel booking market. Under the terms of the agreement, Cendant will pay $27.50 in cash for each share of Orbitz stock. Both companies' boards have agreed to the transaction, but it is still subject to regulatory approval.

New York-based Cendant says it intends to maintain CheapTickets, its own, lower-profile online travel agency, and Orbitz as differentiated consumer brands, but the two will combine their technology platforms. Cendant also operates Galileo, an airline and hotel reservation service used by travel agents.

"The transaction provides a foundation for significant synergies in technology, fulfillment and operations, which will allow both Orbitz and CheapTickets to continue to aggressively market and promote their respective brands while increasing profitability," Samuel Katz, chairman and CEO of Cendant's Travel Distribution Services Division, said in a statement.

Shares of Orbitz closed up $6.40, or 30.8 percent, at $27.17 Wednesday on Nasdaq. Shares of Cendant finished down 9 cents at $21.93 on the New York Stock Exchange.

Chicago-based Orbitz, which operates a Web site selling flights, lodging, rental cars and vacation packages, debuted in February 2000 with airline investors American Airlines, which is owned by AMR Corp., Continental Airlines Inc., Delta Air Lines Inc., Northwest Airlines Corp. and United Airlines, which is owned by UAL Corp. Orbitz became a publicly traded company last December.

Orbitz, which ranks No. 3 in revenues behind competitor Web sites Expedia Inc. and Travelocity, has grown rapidly, benefitting from rapid growth in online bookings. More than a third of all travel is booked online, with such bookings growing at an annual rate of 30 percent to 40 percent, according to analyst Lorraine Sileo of the travel research firm PhoCusWright Inc.

Sileo calls the acquisition of Orbitz a very big deal for Cendant, which she says has always wanted to be a player in Internet travel services. She noted that its past efforts, including Lodging.com, Trip.com and CheapTickets, have never been able to compete with the top industry players.

"It's a good business to be in, especially if you are among the winners at the top," Sileo said. But she noted that Orbitz has been a very lean operation as an independent company, and Cendant will have to keep it that way if it wants Orbitz to remain profitable.