FOR IMMEDIATE RELEASE
Cendant Corporation Announces Preliminary Agreement in Principle
To Settle PRIDES Securities Class Action Suit
For Holders as of April 15, 1998
Settlement Not Expected to Reduce 1999 Earnings Per Share
Non-Cash Settlement in Form of Tradeable Rights Securities
Cendant Would Record Estimated $350 Million
Before Tax ($220 Million After Tax, or $0.26 per Share) Charge in 4Q98
Agreement is Subject to Final Documentation and Court Approval
NEW YORK, NY - January 7, 1999 - Cendant Corporation (NYSE:CD) announced
today that it has reached a preliminary agreement in principle with plaintiffs'
counsel representing the class of holders of its PRIDES securities who purchased
their securities on or prior to April 15, 1998 to settle their class action
lawsuit against the company.
Under the agreement only persons who owned Income or Growth PRIDES
("PRIDES") at the close of business on April 15, 1998 will be eligible to
receive a new additional "Right" for each PRIDES security held. Current holders
of PRIDES will not receive any Rights (unless they also held PRIDES on April 15,
1998).
If the potential settlement proceeds as contemplated, Cendant will record
an after tax charge of approximately $220 million, or $0.26 per share, ($350
million pre-tax) in the fourth quarter of 1998. The Company will record an
increase in Shareholders' Equity of $350 million as a result of the prospective
issuance of the Rights. As a result, the potential settlement should not reduce
the Company's net book value. In addition it is not expected to reduce 1999
earnings per share.
For a period beginning upon distribution of the Rights and concluding upon
expiration of the Rights, Cendant will issue a New Income PRIDE or a New Growth
PRIDE to any person who delivers a Right and an existing Income or Growth PRIDE
security ("New PRIDES").
The terms of the New PRIDES will be the same as the original PRIDES except
that the associated common shares will be increased to lower the conversion
price from the current range of $37 to $48 to a range determined immediately
prior to the distribution of the rights so that, based upon an agreed upon
valuation mechanism, the market value of each new PRIDE will exceed the value of
the original PRIDE by $11.71, or, in the aggregate, approximately $350 million.
The effect of this non-cash settlement in the form of a Rights issuance is
expected to be to distribute, based upon current market prices, approximately 17
million shares upon the PRIDES conversion in February, 2001 which represents
approximately 2% more shares than are currently outstanding.
Rights will be distributed to holders (who do not opt out of the class) on
the later of (a) immediately following final court approval of the proposed
settlement; and (b) Cendant's being informed by the Securities and Exchange
Commission that a registration statement covering New Income PRIDES and New
Growth PRIDES, as discussed below, is effective.
Application will be made to list Rights for trading on the NYSE or NASDAQ,
and a "when issued" market is expected to be established. The rights will trade
for a period of 60 days, after which they will expire.
There is no assurance that a definitive agreement will be reached and any
such agreement is subject to court approval and will be subject to certain
conditions. There can be no assurance that the court will approve the agreement
or that the conditions contained in any definitive agreement will be fulfilled.
Statements about future results made in this release may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations and the current economic environment. The Company cautions that
these statements are not guarantees of future performance. They involve a number
of risks and uncertainties that are difficult to predict. Actual results could
differ materially from those expressed or implied in the forward-looking
statements. Important assumptions and other important factors that could cause
actual results to differ materially from those in the forward-looking statements
are specified in the Company's Prospectus Supplement dated November 24, 1998.
Cendant is one of the world's foremost providers of consumer and business
services. The Company operates in three principal segments: Travel Services,
Real Estate Services and Alliance Marketing. In Travel Services, Cendant is the
leading franchisor of hotels and rental
car agencies worldwide; the largest provider of vacation exchange services; a
leading fleet management company; the UK's largest private car park operator;
and a leading motorist assistance group in the UK. In Real Estate Services,
Cendant is the world's largest franchisor of residential real estate brokerage
offices, a major provider of mortgage services to consumers and a global leader
in corporate employee relocation. In Alliance Marketing, Cendant provides access
to insurance, travel, shopping, auto, and other services, primarily through
direct marketing to customers of its affinity partners. The Company has more
than 35,000 employees and operates in over 100 countries.
Media Contact: Investor Contacts:
Elliot Bloom Denise Gillen
973-496-8414 973-496-7303
Sam Levenson
973-496-5023
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