SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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March 19, 1999 (March 18, 1999)
(Date of Report (date of earliest event reported))
Cendant Corporation
(Exact name of Registrant as specified in its charter)
Delaware 1-10308 06-0918165
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or Identification Number)
organization)
9 West 57th Street
New York, NY 10019
(Address of principal (Zip Code)
executive office)
(212) 413-1800
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if applicable)
8
Item 5. Other Events
Settlement of PRIDES Class Action Litigation
On March 17, 1999, we announced that we reached a final settlement
agreement with plaintiff's counsel representing the class of holders of our
PRIDES securities who purchased their securities on or prior to April 15, 1998
("eligible persons") to settle their class action lawsuit against us. Under the
final settlement agreement, eligible persons will receive a new security - a
Right - for each PRIDES security held on April 15, 1998. Current holders of
PRIDES will not receive any Rights (unless they also held PRIDES on April 15,
1998). We had originally announced a preliminary agreement in principle to
settle such lawsuit on January 7, 1999. The final agreement maintained the basic
structure and accounting treatment as the preliminary agreement.
Based on the settlement agreement, we recorded an after tax charge of
approximately $228 million, or $0.26 per share, ($351 million pre-tax) in the
fourth quarter of 1998 associated with the preliminary agreement in principle to
settle the PRIDES securities class action. We recorded an increase in additional
paid-in capital of $350 million offset by a decrease in retained earnings of
$228 million resulting in a net increase in stockholders' equity of $122 million
as a result of the prospective issuance of the Rights. As a result, the
potential settlement should not reduce net book value. In addition it is not
expected to reduce 1999 earnings per share unless our common stock price
materially appreciates.
At any time during the life of the Rights, holders may (a) sell them or
(b) exercise them by delivering to us three Rights together with two PRIDES in
exchange for two new PRIDES (the "New PRIDES"). The terms of the New PRIDES will
be the same as the currently outstanding PRIDES, except that the conversion rate
will be revised so that, at the time the Rights are distributed, each New PRIDES
will have a value equal to $17.57 more than each original PRIDES, based upon a
generally accepted valuation model. Based upon the closing price per share of
$16.6875 of our Common Stock on March 17, 1999, the effect of the issuance of
the New PRIDES will be to distribute approximately 19 million more shares of our
common stock when the mandatory purchase of our common stock associated with the
PRIDES occurs in February of 2001. This represents approximately 2% more shares
of common stock than are currently outstanding.
The settlement agreement also requires us to offer to sell 4 million
additional PRIDES (having identical terms to currently outstanding PRIDES) (the
"Additional PRIDES") at "theoretical value" to holders of Rights for cash.
Theoretical value will be based on the same valuation model utilized to set the
conversion rate of the New PRIDES. Based on that valuation model, the currently
outstanding PRIDES have a theoretical value of $28.07 based on the closing price
for our common stock on March 17, 1999, which is less than their current trading
price. The offering of Additional PRIDES will be made only pursuant to a
prospectus filed with the SEC. We currently expect to use the proceeds of such
an offering to repurchase our common stock and for other general corporate
purposes. The arrangement to offer Additional PRIDES is designed to enhance the
trading value of the Rights by removing up to 6 million Rights from circulation
via exchanges associated with the offering and to enhance the open market
liquidity of New PRIDES by creating 4 million New PRIDES via exchanges
associated with the offering. If holders of Rights do not acquire all such
PRIDES, they will be offered to the public.
Under the settlement agreement, we have also agreed to file a shelf
registration statement for an additional 15 million PRIDES, which could be
issued by us at any time for cash. However, during the last 30 days prior to the
expiration of the Rights in February 2001, we will be required to make these
additional PRIDES available to holders of Rights at a price in cash equal to
105% of the theoretical value of the additional PRIDES as of a specified date.
The PRIDES, if issued, would have the same terms as the currently outstanding
PRIDES and could be used to exercise Rights.
The Rights will be distributed following final court approval of the
settlement and after the effectiveness of the registration statement filed with
the SEC covering the New PRIDES. It is presently expected that if the court
approves the settlement and such conditions are fulfilled, the Rights will be
distributed in August or September 1999. This summary of the settlement does not
constitute an offer to sell any securities, which will only be made by means of
a prospectus after a registration statement is filed with the SEC. There can be
no assurance that the court will approve the agreement or that the conditions
contained in the agreement will be fulfilled.
Reference is made to the press release dated March 18, 1999 attached
hereto as Exhibit 99.1 which is incorporated herein by reference in its
entirety.
Item 7. Exhibits
Exhibit
No. Description
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99.1 Press release: Cendant Finalizes Settlement Agreement in
PRIDES Securities Class Action Suit, dated March 18, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENDANT CORPORATION
By: /s/ James E. Buckman
James E. Buckman
Vice Chairman and
General Counsel
Date: March 18, 1999
CENDANT CORPORATION
CURRENT REPORT ON FORM 8-K
Report Dated March 19, 1999 (March 18, 1999)
EXHIBIT INDEX
Exhibit
No. Description
- ------- --------------------------------------------------------------
99.1 Press release: Cendant Finalizes Settlement Agreement in
PRIDES Securities Class Action Suit, dated March 18, 1999.