Cendant shares slip on plan to split

October 25, 2005|Associated Press

NEW YORK -- Cendant Corp., which built itself into a $20 billion conglomerate to please investors, said yesterday it was disbanding into four separate companies. The reason for the split: Its unhappy investors.

But Wall Street remained grumpy with the company. Shares of Cendant, which owns Century 21 real estate, Ramada hotels, Avis rental cars, and the Orbitz online travel service, fell 6.6 percent on the New York Stock Exchange.

Cendant, whose stock price never fully recovered from a 1998 accounting scandal, modeled itself as a service industry version of General Electric Co., chairman and chief executive Henry R. Silverman said. The phrase, ''manage risk through size and diversity" was ''almost a mantra," Silverman said.

But today's hedge fund managers want stocks that make big moves, Silverman said. The buy-and-hold investors of the past, who appreciated the smooth earnings a conglomerate could deliver, are gone, he said.

''I don't know where those folks went, but that is not today's shareholder," he said.

Goldman Sachs put a breakup price on the company of $22.37 a share, which is more than $1 below Cendant's 52-week high for the year.

Cendant's split, which was approved by the company's board of directors, will occur next summer when the company spins off 100 percent of the equity of the three new companies to its shareholders.