[HFS LOGO] [CUC LOGO]
FOR IMMEDIATE RELEASE
CUC INTERNATIONAL INC. AND HFS INCORPORATED TO COMBINE IN
MERGER OF EQUALS,
CREATING WORLD'S LEADING CONSUMER SERVICES COMPANY
Takes Advantage of "Seamless Fit" and Expertise in Delivering
Products and Services to Consumers and Businesses
Combined Company to Have Market Capitalization
of Approximately $22 Billion
Cross-Marketing Opportunities Will Fuel Growth
Stamford, CT and Parsippany, NJ, May 27, 1997 -- CUC International
Inc. (NYSE,CU) and HFS Incorporated (NYSE:HFS) announced today a definitive
agreement to merge the two companies in a tax-free exchange of shares. The
combined company, to be named at the closing of the transaction, will be a
leading provider of consumer and business services worldwide. It would have
had combined revenues of approximately $4.3 billion, net income of nearly
$600 million and free cash flow of approximately $700 million, based on pro
forma performance in calendar 1996, and a market capitalization of
approximately $22 billion.
HFS is a leading global services company with a base of 100 million
consumers, operating through well-known brands such as Avis, Days Inn,
Resort Condominiums International, Ramada, Coldwell Banker and Century 21.
CUC, with over 68 million memberships worldwide, is a leading member
services and direct marketing organization offering value and convenience
to consumers in shopping, travel, dining, local merchant discounts, auto
and home buying and many other services. Cross-marketing opportunities
between CUC and HFS are expected to increase further revenue and profit
growth.
Pursuant to the merger agreement, 2.4031 shares of CUC
International common stock will be exchanged for each share of HFS
Incorporated common stock. CUC will issue approximately 434 million common
shares, valued at about $11 billion. Following the transaction, the
combined company will have approximately 870 million shares outstanding.
The transaction will be accounted for as a pooling-of-interests. The
current shareholders of each company will own approximately 50% of the
combined company.
The transaction has been unanimously approved by both companies'
Boards of Directors and requires the approval of the shareholders of both
companies. It is subject to customary closing conditions, and is expected
to be completed in the Fall of 1997.
Shared, Powerful Business Model Offers Substantial Opportunity for Growth
Henry R. Silverman, Chairman and Chief Executive Officer of HFS
Incorporated, said, "This transaction creates a world-class consumer
services company with extraordinary revenue and profit growth potential. By
combining HFS's brands and our consumer reach of more than 100 million
customers annually with CUC's direct marketing expertise, powerful club
membership delivery system, and 68 million memberships worldwide, we will
create tremendous new opportunities that are not available to either
company on its own. In so doing, we have the combined potential for
exceptional earnings and shareholder value creation for two companies that
have already established excellent records in this regard. Walter Forbes
and his management team have created one of the most innovative and
successful companies in the history of the services industry. We are
confident that by combining our operating, financial and management
strengths, we will create one of the foremost consumer and business
services companies in the world."
Walter A. Forbes, Chairman and Chief Executive Officer of CUC
International Inc., said, "Together, we will benefit from this unique
franchise: providing value-added services to consumers and businesses --
while substantially enhancing growth opportunities. With similar business
models, both companies have pursued two sides of the same high-growth
strategy: helping smaller players, both individuals or businesses, to
compete in a global, information-intensive and increasingly competitive
economy. The combined company will have increased purchasing power and
other advantages associated with greater scale."
Shared Management; No Employee Reductions Planned
Following the merger, Henry Silverman will serve as President and
Chief Executive Officer of the combined company, and Walter Forbes will be
Chairman of the Board of Directors. On January 1, 2000, Mr. Forbes will
become President and CEO and Mr. Silverman will become Chairman. The two
companies will have equal representation on the combined company's Board of
Directors with a super-majority voting requirement in effect for certain
governance matters.
E. Kirk Shelton, President and Chief Operating Officer, Christopher
K. McLeod, Executive Vice President, Kenneth A. Williams, Vice Chairman,
and Robert T. Tucker, Corporate Secretary, all of CUC, will be Vice
Chairmen of the combined company. John D. Snodgrass, Vice Chairman,
President and Chief Operating Officer of HFS, and Stephen P. Holmes, Robert
D. Kunisch and Michael P. Monaco, each Vice Chairmen of HFS, will also
serve as Vice Chairmen of the combined company. Mr. Monaco will serve as
Chief Financial Officer of the combined company, with Cosmo Corigliano,
Chief Financial Officer of CUC, becoming CFO after a transition period. Mr.
Monaco will then assume certain operating responsibilities. James E.
Buckman, Senior Executive Vice President of HFS, will be General Counsel of
the combined company until 2000, when Amy N. Lipton, Senior Vice President
and General Counsel of CUC, will assume that role.
Both companies will continue to maintain their respective
operations in Parsippany, NJ, New York City and Stamford, CT, as well as
other major sites nationwide. Small corporate headquarters staffs will be
maintained at each location.
Since the transaction is anticipated to result in considerable new
growth opportunities, it is not expected that there will be any reductions
in employment at either company as a result of this transaction.
Companies to Develop Specific Cross-Marketing,
Growth Opportunities
The companies have already joined together in the extremely
successful Transfer Plus program, which markets CUC's travel service to the
more than 60 million consumers who stay at HFS's eight hotel brands an
average of three to four times annually. Expansion of this partnership
represents only one aspect of the many growth opportunities that will
emerge from the HFS-CUC alliance, which include:
o Direct marketing of CUC services to HFS's 100 million-strong
consumer base who use its travel and real estate services
and can be introduced to CUC's existing core of more than 20
individual and discount membership programs, such as
Travelers Advantage, Shoppers Advantage, and Entertainment
discount coupon books, and its innovative new NetMarket
interactive product.
o Accelerating growth opportunities by combining HFS's
Preferred Alliance products and services with CUC's
marketing infrastructure and core competencies to sell to
both companies' consumer bases.
o Linking HFS's one million annual home buyers and sellers,
served by Coldwell Banker, Century 21 and ERA, with CUC's
CompleteHome Service, which provides home improvement,
repair and upkeep information, a referral database of more
than 8000 contractors and tradesmen and other services of
homeowners. CUC's direct marketing capability will
dramatically increase the combined company's ability to
assist these consumers in the numerous purchasing decisions
typically made by new home buyers, such as health care
providers, dry cleaners, house painting, hardware, repair
services and more.
o Building on vehicle leasing opportunities through a
combination of CUC's Wright Express unit, the leading
provider of information and financial management services to
motor vehicle fleets throughout the U.S., and HFS's recently
acquired PHH fleet management service, the second largest
fleet management company in the U.S.
o Combining HFS's industry-leading corporate relocation
service, which relocates 100,000 employees and their
families a year, with CUC's "New Mover" services, such as
Welcome Wagon, Getting to Know You and Entertainment, which
provide coupons and offers from local merchants to new
residents.
o Combining CUC's industry-leading capability for online
transactions with HFS's outstanding brands. For example,
CUC's successful electronic real estate classified service,
RentNet, could serve as a model for application to HFS brand
websites such as Coldwell Banker and Century 21.
o Accelerating worldwide growth opportunities by combining
HFS's international products and services with CUC's
marketing infra-structure and more than two million
international memberships. The combined company will have
operations in 181 countries.
Using similar business models and philosophies of not owning fixed
assets or significant inventory, CUC's and HFS's branded membership-based
and franchised services are associated with billions of dollars in consumer
transactions each year. The companies are also highly successful at
balancing the competing needs of thousands of vendors, while concentrating
on providing the best buying opportunities possible to customers.
HFS Incorporated reaches approximately 100 million consumers
annually as a leading franchisor of brand name hotels, residential real
estate, and car rental operations. In real estate, HFS's Century 21,
Coldwell Banker and ERA brands have about 12,500 franchised offices with
more than 180,000 brokers and agents in the United States and
internationally. HFS provides mortgage services to consumers and is the
global leader in corporate employee relocation. In travel, the company has
nearly 5,400 Days Inn, Howard Johnson, Knights Inn, Ramada, Super 8,
Travelodge, Villager Lodge and Wingate Inn franchised hotels with more than
500,000 rooms in the United States and internationally. HFS, also the
franchisor of Avis, is the leading provider of vacation timeshare exchanges
through RCI and is the second largest vehicle management services provider
worldwide.
For 1996, including PHH which was acquired in 1997 as a pooling of
interests, HFS had pro forma revenues of approximately $2 billion and pro
forma net income of $309 million, or $1.75 per share. It has about 30,000
employees. Currently, HFS has approximately 181 million shares outstanding.
CUC International Inc is a leading membership-based, consumer
services company that provides access to travel, shopping, auto, dining,
timeshare exchange, financial, and other services to 68 million consumers
worldwide through its more than 20 services, including Shoppers Advantage,
Travelers Advantage, Entertainment, Auto Vantage and other brands. CUC
works in partnership with leading banks, retailers, oil companies, credit
unions, charities, and other organizations to offer consumers convenience
and significant savings when purchasing a wide array of high-quality goods
and services. CUC is also the largest educational and entertainment
software publisher, through its Davidson & Associates, Sierra On-Line,
Knowledge Adventure, and Blizzard Entertainment subsidiaries. In addition,
the company is one of the largest interactive retailers in the world. CUC
has approximately 15,000 employees.
For the year ended January 31, 1997, CUC reported revenues of $2.3
billion. CUC reported net income of $283 million and earnings per share of
$0.70, both before one-time charges related to transaction and
restructuring costs and certain litigation matters related principally to
the completion of the Sierra On-Line, Inc., Davidson & Associates, Inc. and
Ideon Group, Inc. acquisitions. For the year ended January 31, 1997, the
weighted average number of shares outstanding was 405.1 million.
Bear Stearns & Co. acted as financial advisor to HFS, and Goldman,
Sachs & Co. was financial advisor to CUC.
This release contains certain forward-looking statements that
involve potential risks and uncertainties. The companies' future results
could differ materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to,
changes in market conditions, effects of state and federal regulations and
risks inherent in international operations. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only
as of today. The companies undertake no obligation to revise or update
these forward-looking statements to reflect events or circumstances that
arise after today or to reflect the occurrence of unanticipated events.
Contacts:
CUC Investor/Analyst HFS Investor/Analyst
Laura Hamilton Mike Wargotz
Tuesday Only: 212/272-6718 Tuesday Only: 212/272-6362
Ongoing: 203/965-5114 Ongoing: 201/359-5110
CUC Media HFS Media
Don Nathan, Robinson Lerer & Elliot Bloom
Montgomery Ongoing: 201/952-8414
Tuesday Only: 212/272-6718
Ongoing: 212/484-7782
Jim Fingeroth, Kekst and
Company
Tuesday Only: 212/272-7403
Ongoing: 212/521-4819