EXHIBIT 99.1
CENDANT FINALIZES SETTLEMENT AGREEMENT
IN PRIDES SECURITIES CLASS ACTION SUIT
No Change in Previously Reported $351 Million 1998 Fourth Quarter Charge
Agreement Modified to Enhance Trading Value of Rights
NEW YORK, NY - March 18, 1999 - Cendant Corporation (NYSE: CD)
announced today that Cendant and lead counsel for a class of holders of PRIDES
securities, who purchased their securities on or prior to April 15, 1998, have
signed a final non-cash settlement agreement. Cendant and the lead counsel had
announced a preliminary agreement in principle on January 7, 1999. The
Stipulation and Agreement of Compromise and Settlement, now signed by both
parties, maintains the basic structure of the preliminary agreement in principle
while adding four major features designed to enhance the trading value of the
Rights securities.
This press release only contains a summary of the agreement announced
today. Interested parties should review the forthcoming notice and the
Stipulation and Agreement of Compromise and Settlement for a complete
description of the terms of the settlement.
Based on the agreement announced today, Cendant will make no change in
its previously reported after tax charge of approximately $228 million, or $0.26
per share, ($351 million pretax), recorded in the fourth quarter of 1998. The
Company's Shareholders' Equity as of December 31, 1998, reflected an increase in
additional paid-in capital of $350 million as a result of the prospective
issuance of the Rights, offset by a $228 million reduction in retained earnings
from the charge. As a result, the agreement finalized today has increased
Cendant's Shareholders' Equity to date. In addition, the settlement is not
expected to impact 1999 earnings per share unless the stock price of Cendant
common stock materially appreciates.
The effect of this non-cash settlement will be to distribute, based
upon current market prices, approximately 19 million more shares of Cendant
common stock when the mandatory purchase of Cendant common stock associated with
the PRIDES occurs in February of 2001. This represents approximately 2% more
shares than are currently outstanding.
Under the agreement announced today, 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). Application will be made to list the Rights on the
New York Stock Exchange. The Rights will be freely tradable from the date of
distribution to their expiration. In the preliminary agreement announced January
7, it was anticipated that the Rights would expire 60 days after the date of
distribution. The agreement announced today extends the lives of the Rights
until February 14, 2001, which is two days prior to the date for the mandatory
purchase of common stock associated with the PRIDES.
At any time during the life of the Rights, holders may (a) sell them or
(b) exercise them by delivering to Cendant three Rights together with two
PRIDES. Exercising Right holders will receive in exchange two new PRIDES (New
PRIDES). Under the preliminary agreement announced January 7, Right holders were
able to exchange one Right and one PRIDES for one New PRIDES. The revised ratio
(3 for 2) is designed to make the value of Rights less dependent upon the
availability of PRIDES in the open market.
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. This means that the number of shares of Cendant common stock to be
received upon the mandatory purchase of common stock associated with the PRIDES
in February 2001 will be increased so as to initially increase the PRIDES' value
by $17.57. The exact change in the conversion rate required to produce the
targeted value will be determined based on an agreed upon valuation formula at
the time the Rights are distributed. Since three Rights will be required to
revise the terms of two PRIDES, each Right will therefore have a stated value of
$11.71 per Right, or approximately $341.5 million in the aggregate.
The agreement announced today also requires Cendant to offer to sell
four million additional PRIDES (having identical terms to currently outstanding
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 Income PRIDES
have a theoretical value of $28.07 based on yesterday's closing price for
Cendant common stock, which is less than their current trading price.
The offering of the additional PRIDES will occur within 60 days of the
distribution of the Rights, and participating Right holders must agree to
exercise their Rights and exchange all PRIDES acquired in the offering for New
PRIDES. The offering of additional PRIDES will be made only pursuant to a
prospectus filed with the Securities and Exchange Commission. Cendant currently
expects to use the proceeds of such an offering to repurchase common stock and
for other general corporate purposes. The arrangement to offer additional
PRIDES, which was not contemplated in the preliminary agreement, 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. It is also designed 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 agreement announced today, Cendant has also agreed to file a
shelf registration statement for an additional 15 million PRIDES, which could be
issued by it at any time for cash. These PRIDES, if issued, would have the same
terms as the currently outstanding PRIDES and could be used to exercise Rights.
During the last 30 days prior to the expiration of the Rights in February 2001,
Cendant 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. These provisions, which were also not
included in the preliminary settlement agreement, are intended to assure Rights
holders that the Rights will not expire unexercised because of any inability to
obtain PRIDES on the open market.
The Rights will be distributed following final court approval of the
settlement and after the effectiveness of the registration statement filed with
the Securities and Exchange Commission covering the New PRIDES. This press
release does not constitute an offer to sell New PRIDES, which will only be made
by means of a prospectus after a registration statement is filed with the
Securities and Exchange Commission. There can be no assurance that the court
will approve the agreement or that the conditions contained in the agreement
will be fulfilled.
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.
Questions concerning the terms of the settlement agreement should be
directed to Plaintiff's counsel: Kirby, McInerney & Squire LLP, 830 Third Ave.,
10th Fl., New York, NY 10011, Attn: Barrett Godsey, Paralegal, 212-317-2300 or
800-529-4787, Email:
kms@kmslaw.com.
Cendant Corporation is a global provider of consumer and business
services. The company operates in four principal divisions: travel related
services, real estate related services, alliance marketing related services and
other consumer and business services. In travel related services, Cendant is the
leading franchiser of hotels and rental car agencies worldwide; the largest
provider of vacation exchange services; and a leading fleet management company.
In real estate related services, Cendant is the world's largest franchiser 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 related services, Cendant provides access to insurance, travel,
shopping, auto, and other services, primarily through direct marketing to
customers of its affinity partners. Other consumer and business services include
Jackson Hewitt, a leading tax preparation service franchise system in the US;
NPC, the UK's largest private car park operator; and green flag, a leading
motorist assistance group in the UK. Headquartered in New York, NY, the company
has more than 35,000 employees and operates in over 100 countries.
Media Contact: Investor Contacts:
Elliot Bloom Denise Gillen
212-413-1832 212-413-1833
Sam Levenson
212-413-1834