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Orbitz travel service sold

Jeff Tyler Jun 30, 2006

TESS VIGELAND: Travel and real estate company Cendant cancelled reservations for one of its businesses today. It’s selling the online travel agency Orbitz.com to the private equity firm Blackstone Group.The tab: $4 billion and change. Cendant plans to continue slimming down over the coming months. Why? Marketplace’s Jeff Tyler tells us the company just hasn’t been gettin’ enough love on Wall Street.

JEFF TYLER: On top of its travel services, Cendant owns hotels like Ramada Inn and Travelodge. It’s a formible presence in the real estate industry with companies like Century 21 and Coldwell Banker. Then there’s the rental car businesses — Avis and Budget.

Despite all those big-name brands, the company’s diversity didn’t appeal to shareholders. That’s according to Tom Graves, equity analyst at Standard & Poors.

TOM GRAVES: Cendant’s stock price has been penalized by the complexity of the company.

Sometimes that complexity cost the company in the marketplace too. Morningstar analyst Sumit Desai:

SUMIT DESAI: So, for example, if I was Enterprise Rent-a-Car, which competes against Cendant, I would be hesitant to put my inventory on Orbitz.com. Now that they’re independent companies, I’d be more willing to do that.

Independent companies might also spur more investment. In July, Cendant is expected to spin off its hotel and real estate businesses from its rental car companies. Even though the value of business mergers has broken records in the first half of this year, S&P analyst Graves thinks the trend will swing in the opposite direction.

GRAVES: Increasingly, I’m seeing companies look to separate and spin off rather than acquire and become more complex and bigger.

Cendant executives are betting that Wall Street-types will find the ala carte approach more appetizing. Though details have not been finalized, Graves expects Cendant shareholders will receive shares of the new companies.

GRAVES: You’re going to end up with ownership interest in three different businesses.

So far, Wall Street seems to agree that the sum of the parts is worth more than the whole. Shares in Cendant rose more than 3 percent today.

I’m Jeff Tyler for Marketplace.

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