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Friday, November 20, 1998
"It's a good deal easier to know what's going to happen than when it's going to happen." -- Philip Fisher
Non-Acquisitive Cendant
"Accounting-challenged" diversified consumer and business services company Cendant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> reportedly is poised to announce it will sell its software business to Havas SA, France's biggest publisher (majority owned by the country's largest water utility, Vivendi SA), for $800 million to $985 million in cold hard cash. The software unit is one of the world's largest makers of computer games and educational software. Its brands include such well-known names as Sierra On-Line, Blizzard Entertainment, Davidson & Associates, and Knowledge Adventure. The sale is expected to yield an after-tax gain of around $450 million in the first quarter.
Normally acquisitive Cendant is selling off non-core businesses in the wake of admitting to massive accounting fraud to pay down debt, buy back shares, and focus on its main franchising and direct-marketing operations. The company, a.k.a. Accounting Irregularities Galore, has lost roughly 70% of its market value since disclosing the accounting problems in April. Last month, Cendant canceled its agreement to acquire American Bankers Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABI)") else Response.Write("(NYSE: ABI)") end if %> for around $3.1 billion in cash and stock, despite months of insisting it would follow through with the deal.
The software unit was a key component of CUC International, which merged with HFS Inc. to form Cendant late last year. CUC is the root of Cendant's accounting problems, and most of CUC's top executives have resigned as a result. Cendant, now headed by former HFS chairman Henry Silverman, is remaking itself to focus more on what were HFS operations, including franchising such commonplace brands as Days Inn, Howard Johnson, Ramada, Avis, Century 21, and Coldwell Banker.
Related links:
Fool on the Hill: "Cendant the Defendant" (7/14/98)
Fool on the Hill: "D-Cendant" (4/16/98)
Fool on the Hill: "D-Cendant, Part 2" (4/17/98)
News to Go
The pilots union at FDX Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDX)") else Response.Write("(NYSE: FDX)") end if %> Federal Express unit moved to call off a strike vote, effectively eliminating the possibility of disrupting the company's operations during the busy holiday season. The move came after the company signed agreements to outsource its air operations to other airlines. The union is now (sheepishly) asking FedEx to offer the contract the company proposed late last month.
Internet search engine and portal company Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> reported a fiscal first quarter loss of $0.06 a share (excluding one-time items), wider than last year's loss of $0.04 but a penny better than analysts' expectations. Revenues increased 30% from the preceding quarter and 166% from the same year-earlier quarter to $24.8 million. Daily page views grew 51% to 36 million in October from 24 million in July.
The nation's largest bank holding company BankAmerica <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> announced it has agreed to sell Robertson Stephens Investment Management (RSIM) to a group of investors led by RSIM senior management for an undisclosed sum. The company said the sale, expected to be completed in the first quarter of 1999, will "not materially affect" earnings.
Fleet Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLT)") else Response.Write("(NYSE: FLT)") end if %> is on the verge of acquiring the U.S.-based commercial finance unit of Japan's Sanwa Bank for about $750 million, The Wall Street Journal reported, citing "people familiar with the matter." The acquisition would add about $6.4 billion to the $9 billion in assets in Fleet's own commercial finance unit, Fleet Capital Corp.
STOCK SPLITS: Online "Books, Music, and More" retailer Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> announced a 3-for-1 stock split payable January 4, the second split this year... Building products company Lone Star Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LCE)") else Response.Write("(NYSE: LCE)") end if %> plans to split its stock 2-for-1, effective December 28.
SHARE BUYBACKS: Crackers and cereal maker Ralcorp Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RAH)") else Response.Write("(NYSE: RAH)") end if %> announced it will repurchase up to 2 million shares... Mortgage insurer PMI Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PMA)") else Response.Write("(NYSE: PMA)") end if %> plans to buy back as much as $100 million in stock... Chemical coatings company CFC International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CFCI)") else Response.Write("(Nasdaq: CFCI)") end if %> said it will repurchase up to 150,000 shares.
In a pre-emptive strike against Year 2000 (Y2K) madness, the Federal Reserve ordered an additional $50 billion of new currency for circulation in case consumers make a run on their banks and automated teller machines (ATMs). Why $50 billion? The Fed figures that $500 per family is a "reasonable estimate" for what would be needed to buy essentials in the event of a computer crisis. See our five-part series on the Y2K problem.
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
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