OFFER TO PURCHASE FOR CASH
UP TO 50,000,000 SHARES OF COMMON STOCK, PAR VALUE $.01
OF
CENDANT CORPORATION
AT A PURCHASE PRICE NOT GREATER THAN $22.50
NOR LESS THAN $19.75 PER SHARE
BY
CENDANT STOCK CORPORATION,
A WHOLLY OWNED SUBSIDIARY OF
CENDANT CORPORATION
--------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON THURSDAY, JULY 15, 1999, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------
Cendant Stock Corporation, a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Cendant Corporation, a Delaware corporation ("Cendant"),
invites the shareholders of Cendant to tender shares of Cendant common stock,
par value $.01 per share ("Shares"), to Purchaser at prices not greater than
$22.50 nor less than $19.75 per Share in cash, as specified by tendering
shareholders, upon the terms and subject to the conditions set forth in this
Offer to Purchase and the related Letter of Transmittal (which, as amended or
supplemented from time to time, together constitute the "Offer").
Purchaser will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price (not greater than $22.50 nor less than $19.75
per Share), net to the seller in cash, without interest thereon (the "Purchase
Price"), that it will pay for Shares validly tendered and not properly withdrawn
pursuant to the Offer, taking into account the number of Shares so tendered and
the prices specified by tendering shareholders. Purchaser will select the lowest
Purchase Price that will allow it to buy 50,000,000 Shares validly tendered and
not properly withdrawn pursuant to the Offer (or such lesser number of Shares as
are validly tendered and not properly withdrawn at prices not greater than
$22.50 nor less than $19.75 per Share). Purchaser will pay the Purchase Price
for all Shares validly tendered at prices at or below the Purchase Price and not
properly withdrawn, upon the terms and subject to the conditions of the Offer,
including the proration terms hereof. Purchaser reserves the right, in its sole
discretion, to purchase more than 50,000,000 Shares pursuant to the Offer.
Shares tendered at prices in excess of the Purchase Price and Shares not
purchased because of proration will be returned at Purchaser's expense. See
Section 15.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
Shares are listed and principally traded on the New York Stock Exchange,
Inc. (the "NYSE") under the symbol "CD." On June 15, 1999, the last full trading
day on the NYSE prior to the announcement of the Offer, the closing per Share
sales price as reported on the NYSE Composite Tape was $19.75. SHAREHOLDERS ARE
URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SHARES. SEE SECTION 7.
EACH OF THE RESPECTIVE BOARDS OF DIRECTORS OF PURCHASER AND CENDANT HAS
APPROVED THE OFFER. HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER
TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES
AT WHICH SHARES SHOULD BE TENDERED. NONE OF PURCHASER, CENDANT, THEIR RESPECTIVE
BOARDS OF DIRECTORS, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITORY
MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING SHARES. EXCEPT AS SET FORTH IN SECTION 9, PURCHASER AND CENDANT
HAVE BEEN ADVISED THAT NONE OF THEIR RESPECTIVE DIRECTORS OR EXECUTIVE OFFICERS
INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER. SEE SECTION 9.
The Dealer Manager for the Offer is:
[LOGO]
The Information Agent for the offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
June 16, 1999
IMPORTANT
Any shareholders desiring to tender all or any portion of their Shares
should either (i) complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions in the Letter of Transmittal, mail
or deliver it with any required signature guarantee and any other required
documents to ChaseMellon Shareholder Services, L.L.C. (the "Depositary"), and
either mail or deliver the stock certificates for such Shares to the Depositary
(with all such other documents required by the Letter of Transmittal), (ii)
follow the procedure for book-entry delivery set forth in Section 3, or (iii)
request a broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such shareholder. A shareholder having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact that broker, dealer, commercial bank, trust company
or other nominee if such shareholder desires to tender such Shares. Shareholders
who desire to tender Shares and whose certificates for such Shares are not
immediately available or who cannot comply with the procedure for book-entry
transfer on a timely basis or whose other required documentation cannot be
delivered to the Depositary, in any case, by the expiration of the Offer should
tender such Shares by following the procedures for guaranteed delivery set forth
in Section 3.
TO EFFECT A VALID TENDER OF THEIR SHARES, SHAREHOLDERS MUST VALIDLY COMPLETE
THE LETTER OF TRANSMITTAL, INCLUDING THE SECTION RELATING TO THE PRICE AT WHICH
THEY ARE TENDERING SHARES.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent or to the Dealer Manager at their addresses
and telephone numbers set forth on the back cover of this Offer to Purchase.
2
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
PURCHASER OR CENDANT AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL.
DO NOT RELY ON ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR
REPRESENTATION, IF GIVEN OR MADE, AS HAVING BEEN AUTHORIZED BY PURCHASER OR
CENDANT.
------------------------
TABLE OF CONTENTS
SECTION PAGE
----------------------------------------------------------------------------------------------------------- ---------
SUMMARY.................................................................................................... 4
INTRODUCTION............................................................................................... 6
THE OFFER.................................................................................................. 8
1. Number of Shares; Proration.......................................................................... 8
2. Tenders by Owners of Fewer than 100 Shares........................................................... 9
3. Procedure for Tendering Shares....................................................................... 10
4. Withdrawal Rights.................................................................................... 14
5. Purchase of Shares and Payment of Purchase Price..................................................... 15
6. Certain Conditions of the Offer...................................................................... 16
7. Price Range of Shares; Dividends..................................................................... 18
8. Background and Purpose of the Offer; Certain Effects of the Offer.................................... 18
9. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning Shares........ 20
10. Source and Amount of Funds........................................................................... 21
11. Certain Information about Cendant.................................................................... 21
12. Effects of the Offer on the Market for Shares; Registration under the Exchange Act................... 27
13. Certain Legal Matters; Regulatory Approvals.......................................................... 28
14. Certain U.S. Federal Income Tax Consequences......................................................... 28
15. Extension of the Offer; Termination; Amendments...................................................... 31
16. Fees and Expenses.................................................................................... 32
17. Miscellaneous........................................................................................ 33
SCHEDULE I - Certain Transactions Involving Shares......................................................... S-1
ANNEX A - Unaudited Pro Forma Consolidated Financial Statements............................................ A-1
3
SUMMARY
THIS GENERAL SUMMARY IS PROVIDED FOR THE CONVENIENCE OF HOLDERS OF SHARES
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT AND MORE SPECIFIC
DETAILS OF THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL AND ANY
AMENDMENTS OR SUPPLEMENTS HERETO OR THERETO. CAPITAL TERMS USED IN THIS SUMMARY
WITHOUT DEFINITION SHALL HAVE THE RESPECTIVE MEANINGS ASCRIBED TO SUCH TERMS IN
THIS OFFER TO PURCHASE.
Purchaser.................... Cendant Stock Corporation, a Delaware corporation with
principal executive offices at 0 Xxxx 00(xx) Xxxxxx, 00(xx)
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Cendant...................... Cendant Corporation, a Delaware corporation with principal
executive offices at 0 Xxxx 00(xx) Xxxxxx, 37(th) Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
Shares....................... Shares of Cendant common stock, par value $.01 per share.
Number of Shares to be
Purchased.................. 50,000,000 Shares (or such lesser number of Shares as are
validly tendered and not properly withdrawn) pursuant to the
Offer.
Purchase Price............... Purchaser will select the lowest single per Share net cash
price, not greater than $22.50 nor less than $19.75 per
Share, that will allow it to buy 50,000,000 Shares (or such
lesser number of Shares as are validly tendered and not
properly withdrawn) pursuant to the Offer. All Shares
acquired in the Offer will be acquired at the Purchase Price
even if tendered below the Purchase Price. Each shareholder
desiring to tender Shares must specify in the Letter of
Transmittal the minimum price (not greater than $22.50 nor
less than $19.75 per Share) at which such shareholder is
willing to have Shares purchased by Purchaser or must check
the box in the Letter of Transmittal indicating that the
shareholder is tendering Shares at the Purchase Price.
How to Tender Shares......... See Section 3. Call the Information Agent, the Dealer
Manager or consult your broker for assistance.
Brokerage Commissions........ None for registered shareholders who tender their Shares
directly to the Depositary. Shareholders holding Shares
through brokers or banks are urged to consult the brokers or
banks to determine whether transaction costs are applicable
if shareholders tender Shares through the brokers or banks
and not directly to the Depositary.
Stock Transfer Tax........... None, if payment is made to the registered holder.
Expiration and Proration
Dates...................... Thursday, July 15, 1999, at 12:00 Midnight, New York City
time, unless extended by Purchaser.
Proration.................... In the event that proration of tendered Shares is required,
proration for each shareholder tendering Shares, other than
Odd Lot Owners, shall be based on the ratio of the number of
Shares tendered by such shareholder at or below the Purchase
Price to the total number of Shares tendered by all
shareholders, other than Odd Lot Owners, at or below the
Purchase Price.
Payment Date................. As soon as practicable after the Expiration Date.
4
Position of Purchaser,
Cendant and their
Respective Directors....... Neither Purchaser, Cendant nor any of their respective
Directors makes any recommendation to any shareholder as to
whether to tender or refrain from tendering Shares. Except
as set forth in Section 9, Purchaser and Cendant have been
advised that none of their respective directors or executive
officers intends to tender any Shares pursuant to the Offer.
Withdrawal Rights............ Tendered Shares may be withdrawn at any time prior to 12:00
Midnight, New York City time, on Thursday, July 15, 1999,
unless the Offer is extended by Purchaser and unless
previously purchased, after August 12, 1999. See Section 4.
Odd Lots..................... There will be no proration of Shares tendered by any
shareholder owning beneficially fewer than 100 Shares in the
aggregate (including Shares reflecting interests in the
Savings Plans (as defined)) as of June 15, 1999, who
continues to beneficially own fewer than 100 Shares on the
Expiration Date, and who tenders all such Shares at or below
the Purchase Price prior to the Expiration Date and who
checks the "Odd Lots" box in the Letter of Transmittal and,
if applicable, on the Notice of Guaranteed Delivery. See
Section 1.
Further Developments
Regarding the Offer........ Call the Information Agent, the Dealer Manager or consult
your broker.
5
TO THE HOLDERS OF SHARES OF
COMMON STOCK OF CENDANT CORPORATION:
INTRODUCTION
Cendant Stock Corporation, a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Cendant Corporation, a Delaware corporation ("Cendant"),
invites the shareholders of Cendant to tender shares of Cendant common stock,
par value $.01 per share ("Shares"), to Purchaser at prices not greater than
$22.50 nor less than $19.75 per Share in cash, as specified by tendering
shareholders, upon the terms and subject to the conditions set forth in this
Offer to Purchase and the related Letter of Transmittal (which, as amended or
supplemented from time to time, together constitute the "Offer").
Purchaser will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price (not greater than $22.50 nor less than $19.75
per Share), net to the seller in cash, without interest thereon (the "Purchase
Price"), that it will pay for Shares validly tendered and not properly withdrawn
pursuant to the Offer, taking into account the number of Shares so tendered and
the prices specified by tendering shareholders. Purchaser will select the lowest
Purchase Price that will allow it to buy 50,000,000 Shares validly tendered and
not properly withdrawn pursuant to the Offer (or such lesser number of Shares as
are validly tendered and not properly withdrawn at prices not greater than
$22.50 nor less than $19.75 per Share). Purchaser will pay the Purchase Price
for all Shares validly tendered prior to the Expiration Date (as defined in
Section 1) at prices at or below the Purchase Price and not properly withdrawn,
upon the terms and subject to the conditions of the Offer, including the
proration terms hereof. Purchaser reserves the right, in its sole discretion, to
purchase more than 50,000,000 Shares pursuant to the Offer.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
If, prior to the Expiration Date, more than 50,000,000 Shares (or such
greater number of Shares as Purchaser may elect to purchase) are validly
tendered at or below the Purchase Price and not properly withdrawn, Purchaser
will, upon the terms and subject to the conditions of the Offer, purchase Shares
first from all Odd Lot Owners (as defined in Section 2) who validly tender all
their Shares at or below the Purchase Price (and do not properly withdraw them
prior to the Expiration Date) and then on a PRO RATA basis from all other
shareholders who validly tender Shares at prices at or below the Purchase Price
(and do not properly withdraw them prior to the Expiration Date). Purchaser will
return at its own expense all Shares not purchased pursuant to the Offer,
including Shares tendered at prices greater than the Purchase Price and Shares
not purchased because of proration. The Purchase Price will be paid net to the
tendering shareholder in cash, without interest thereon, for all Shares
purchased. Tendering shareholders who hold Shares in their own name and who
tender their Shares directly to the Depositary will not be obligated to pay
brokerage commissions, solicitations fees or, subject to Instruction 7 of the
Letter of Transmittal, stock transfer taxes on Purchaser's purchase of Shares
pursuant to the Offer. HOWEVER, ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO
FAILS TO COMPLETE, SIGN AND RETURN TO THE DEPOSITARY (AS DEFINED BELOW) THE
SUBSTITUTE FORM W-9 THAT IS INCLUDED WITH THE LETTER OF TRANSMITTAL OR OTHERWISE
ESTABLISH AN EXEMPTION MAY BE SUBJECT TO A REQUIRED FEDERAL BACKUP WITHHOLDING
TAX OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE
PURSUANT TO THE OFFER. SEE SECTION 3. IN ADDITION, THE DEPOSITARY WILL WITHHOLD
UNITED STATES FEDERAL INCOME TAX AT A RATE OF 30% FROM THE GROSS PROCEEDS PAID
PURSUANT TO THE OFFER TO A FOREIGN SHAREHOLDER (AS DEFINED IN SECTION 3) OR HIS
AGENT, UNLESS THE DEPOSITARY DETERMINES THAT AN EXEMPTION FROM, OR A REDUCED
RATE OF, WITHHOLDING TAX IS AVAILABLE PURSUANT TO A TAX TREATY OR THAT AN
EXEMPTION FROM WITHHOLDING OTHERWISE APPLIES. SEE SECTION 3 FOR A DISCUSSION OF
THE APPLICABLE U.S. FEDERAL INCOME TAX WITHHOLDING RULES AND THE POTENTIAL FOR
BEING SUBJECT TO REDUCED WITHHOLDING AND FOR OBTAINING A REFUND OF ALL OR A
PORTION OF ANY TAX WITHHELD. In addition, Purchaser will pay all fees and
expenses of Banc of America Securities LLC, as Dealer Manager ("Banc of America"
or the "Dealer Manager"), and ChaseMellon Shareholder Services, L.L.C., as
Information Agent and as Depositary (the "Information Agent" and the
"Depositary", respectively) in connection with the Offer. See Section 16.
6
EACH OF THE RESPECTIVE BOARDS OF DIRECTORS OF PURCHASER AND CENDANT HAS
APPROVED THE OFFER. HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER
TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES
AT WHICH SHARES SHOULD BE TENDERED. NONE OF PURCHASER, CENDANT, THEIR RESPECTIVE
BOARDS OF DIRECTORS, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY
MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING SHARES. EXCEPT AS SET FORTH IN SECTION 9, PURCHASER AND CENDANT
HAVE BEEN ADVISED THAT NONE OF THEIR RESPECTIVE DIRECTORS OR EXECUTIVE OFFICERS
INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER. SEE SECTION 9.
Purchaser's and Cendant's respective Boards of Directors believe that
Cendant's financial condition and outlook and current market conditions make
this an attractive time to repurchase a portion of the outstanding Shares. In
addition, Purchaser's and Xxxxxxx's respective Boards of Directors believe that
the Offer is in the best interest of their companies and their shareholders and
they further believe that it will enhance shareholder value in the short term
and the long term. Purchaser is making the Offer to (i) improve Cendant's
capital structure for the benefit of Cendant shareholders, by using certain of
the proceeds to be realized by Cendant from the disposition (the "Merger") of
Cendant's fleet management and fuel card businesses (the "Fleet Business") to
Avis Rent A Car, Inc., a Delaware corporation ("Avis") and (ii) afford to those
shareholders who desire liquidity an opportunity to sell all or a portion of
their Shares without the usual transaction costs associated with open market
sales. The Offer also gives shareholders an opportunity to sell their Shares at
a price equal to or greater than the prevailing market prices of the Shares
immediately prior to the announcement of the Offer. After the Offer is
completed, Cendant expects to have sufficient cash flow and access to other
sources of capital to fund its businesses.
As of the close of business on June 11, 1999, there were 768,183,412 Shares
outstanding and 107,042,510 Shares issuable upon exercise of outstanding stock
options currently execisable or exercisable within 60 days hereof ("Options")
under Cendant's stock option plans. As of the close of business on June 11, 1999
there were 28,573,000 Income PRIDES and 1,327,000 Growth PRIDES outstanding (the
"FELINE PRIDES"). The FELINE PRIDES are convertible into Shares by operation of
forward purchase contracts which call for the holder of FELINE PRIDES to
purchase a minimum of 1.0395 Shares and a maximum of 1.3514 Shares per FELINE
PRIDE, depending upon the average of the closing price per Share for a 20
consecutive trading day period ending in mid-February of 2001. Cendant intends
to issue additional FELINE PRIDES in connection with the settlement of the class
action claims brought by holders of existing FELINE PRIDES (the "New FELINE
PRIDES"). In addition, as of the close of business on June 11, 1999 there was
$550 million aggregate principal amount of 3% Convertible Subordinated Notes
("3% Notes") outstanding, with each $1,000 principal amount of 3% Notes
convertible into 32.6531 Shares (subject to adjustment in certain events). The
50,000,000 Shares that Purchaser is offering to purchase represent approximately
7% of the outstanding Shares (approximately 5% assuming the exercise of all
outstanding Options, the conversion of all outstanding FELINE PRIDES and 3%
Notes and the conversion of the New FELINE PRIDES). On June 11, 1999, there were
10,585 holders of record of Shares.
The Cendant Corporation Employee Savings Plan (the "Employee Savings Plan"),
the Cendant Corporation Deferred Compensation Plan (the "Deferred Compensation
Plan"), the PHH Corporation Directors Deferred Stock Retirement Plan (the "PHH
Plan") and the Cendant Membership Services, Inc. Savings Incentive Plan (the
"Savings Incentive Plan" and together with the Employee Savings Plan, the
Deferred Compensation Plan and the PHH Plan, the "Savings Plans") hold Shares in
accounts for participants thereunder. Participants may instruct the trustees of
the Savings Plans to tender all or part of the Shares reflecting the
participant's interest in Shares held in the Savings Plans by following the
instructions set forth in "Procedure for Tendering Shares--Savings Plans" in
Section 3.
Shares are listed and principally traded on the New York Stock Exchange,
Inc. (the "NYSE") under the symbol "CD." On June 15, 1999, the last full trading
day on the NYSE prior to the announcement of the Offer, the closing per Share
sales price as reported on the NYSE Composite Tape was $19.75. SHAREHOLDERS ARE
URGED TO OBTAIN CURRENT QUOTATIONS ON THE MARKET PRICE OF SHARES.
7
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, Purchaser will
purchase 50,000,000 Shares or such lesser number of Shares as are validly
tendered before the Expiration Date (and not properly withdrawn in accordance
with Section 4) at a price (determined in the manner set forth below) not
greater than $22.50 nor less than $19.75 per Share, net to the seller in cash,
without interest thereon. The term "Expiration Date" means 12:00 Midnight, New
York City time, on Thursday, July 15, 1999, unless and until Purchaser in its
sole discretion shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall refer to the latest time
and date at which the Offer, as so extended by Purchaser, shall expire. See
Section 15 for a description of Purchaser's right to extend the time during
which the Offer is open and to delay, terminate or amend the Offer. Subject to
the terms and conditions set forth herein, if the Offer is oversubscribed,
Shares tendered at or below the Purchase Price before the Expiration Date will
be purchased on a pro rata basis, except for Odd Lots. The proration period also
expires on the Expiration Date.
Purchaser will, upon the terms and subject to the conditions of the Offer,
determine a single per Share Purchase Price that it will pay for Shares validly
tendered and not properly withdrawn pursuant to the Offer, taking into account
the number of Shares so tendered and the prices specified by tendering
shareholders. Purchaser will select the lowest Purchase Price that will allow it
to buy 50,000,000 Shares validly tendered and not properly withdrawn pursuant to
the Offer (or such lesser number as are validly tendered and not properly
withdrawn at prices not greater than $22.50 nor less than $19.75 per Share).
Purchaser reserves the right, in its sole discretion, to purchase more than
50,000,000 Shares pursuant to the Offer. See Section 15. In accordance with
applicable regulations of the Securities and Exchange Commission (the
"Commission"), Purchaser may purchase pursuant to the Offer an additional amount
of Shares not to exceed 2% of the outstanding Shares without amending or
extending the Offer. See Section 15. If (i) Purchaser increases or decreases the
price to be paid for Shares, Purchaser increases or decreases the Dealer
Manager's fee, Purchaser increases the number of Shares being sought and such
increase in the number of Shares being sought exceeds 2% of the outstanding
Shares, or Purchaser decreases the number of Shares being sought and (ii) the
Offer is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that notice of
such increase or decrease is first published, sent or given in the manner
specified in Section 15, the Offer will be extended until the expiration of such
period of ten business days. For purposes of the Offer, a "business day" means
any day other than a Saturday, Sunday or federal holiday and consists of the
time period from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
In accordance with Instruction 5 of the Letter of Transmittal, each
shareholder desiring to tender Shares must specify the price (not greater than
$22.50 nor less than $19.75 per Share) at which such shareholder is willing to
have Purchaser purchase Shares (in multiples of $0.25). As promptly as
practicable following the Expiration Date, Purchaser will, in its sole
discretion, determine the Purchase Price (not greater than $22.50 nor less than
$19.75 per Share) that it will pay for Shares validly tendered and not properly
withdrawn pursuant to the Offer, taking into account the number of Shares so
tendered and the prices specified by tendering shareholders. Purchaser will pay
the Purchase Price, even if such Shares were tendered below the Purchase Price,
for all Shares validly tendered prior to the Expiration Date at prices at or
below the Purchase Price and not properly withdrawn, upon the terms and subject
to the conditions of the Offer. All Shares not purchased pursuant to the Offer,
including Shares tendered at prices greater than the Purchase Price and Shares
not purchased because of proration, will be returned to the tendering
shareholders at Purchaser's expense as promptly as practicable following the
Expiration Date.
8
If the number of Shares validly tendered at or below the Purchase Price and
not properly withdrawn prior to the Expiration Date is less than or equal to
50,000,000 Shares (or such greater number of Shares as Purchaser may elect to
purchase pursuant to the Offer), Purchaser will, upon the terms and subject to
the conditions of the Offer, purchase all Shares so tendered at the Purchase
Price.
PRIORITY. Upon the terms and subject to the conditions of the Offer, in the
event that prior to the Expiration Date more than 50,000,000 Shares (or such
greater number of Shares as Purchaser may elect to purchase pursuant to the
Offer) are validly tendered at or below the Purchase Price and not withdrawn,
Purchaser will purchase such validly tendered Shares in the following order of
priority:
(i) all Shares validly tendered at or below the Purchase Price and not
properly withdrawn prior to the Expiration Date by any Odd Lot Owner (as
defined in Section 2) who:
(a) tenders all Shares (including Shares attributable to individual
accounts under the Savings Plans) beneficially owned by such Odd Lot
Owner at or below the Purchase Price (tenders of fewer than all Shares
beneficially owned by such shareholder will not qualify for this
preference); and
(b) completes the box captioned "Odd Lots" on the Letter of
Transmittal (or, in the case of Savings Plans Participants (as defined
below) holding Odd Lots, the Direction Form (as defined below) sent to
such Participants (see Section 3)) and, if applicable, on the Notice of
Guaranteed Delivery, and
(ii) after purchase of all of the foregoing Shares, all other Shares
validly tendered at or below the Purchase Price and not withdrawn prior to
the Expiration Date on a PRO RATA basis.
PRORATION. In the event that proration of tendered Shares is required,
Purchaser will determine the final proration factor as promptly as practicable
after the Expiration Date. Proration for each shareholder tendering Shares
(other than Odd Lot Owners) shall be based on the ratio of the number of Shares
tendered by such shareholder at or below the Purchase Price to the total number
of Shares tendered by all shareholders (other than Odd Lot Owners) at or below
the Purchase Price. This ratio will be applied to shareholders tendering Shares
(other than Odd Lot Owners) to determine the number of Shares that will be
purchased from each such shareholder pursuant to the Offer. Although Purchaser
does not expect to be able to announce the final results of such proration until
approximately seven business days after the Expiration Date, it will announce
preliminary results of proration by press release as promptly as practicable
after the Expiration Date. Shareholders can obtain such preliminary information
from the Information Agent or Dealer Manager and may be able to obtain such
information from their brokers.
As described in Section 14, the number of Shares that Purchaser will
purchase from a shareholder may affect the United States federal income tax
consequences to the shareholder of such purchase and therefore may be relevant
to a shareholder's decision whether to tender Shares. The Letter of Transmittal
affords each tendering shareholder the opportunity to designate the order of
priority in which Shares tendered are to be purchased in the event of proration.
This Offer to Purchase and the related Letter of Transmittal will initially
be mailed to record holders of Shares as of June 15, 1999 and will be furnished
to brokers, banks and similar persons whose names, or the names of whose
nominees, appear on Cendant's shareholder list or, if applicable, who are listed
as participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES
Purchaser, upon the terms and subject to the conditions of the Offer, will
accept for purchase, without proration, all Shares validly tendered at or below
the Purchase Price and not properly withdrawn prior to the Expiration Date by or
on behalf of shareholders who beneficially owned as of the close of business on
June 15, 1999, and continue to beneficially own as of the Expiration Date, an
aggregate of fewer than 100 Shares, including Shares attributable to individual
accounts under the Savings Plans ("Odd Lot Owners").
9
See Section 1. To avoid proration, however, an Odd Lot Owner must validly tender
at or below the Purchase Price all such Shares (including Shares attributable to
individual accounts under the Savings Plans) that such Odd Lot Owner
beneficially owns; partial tenders will not qualify for this preference. This
preference is not available to partial tenders or to owners of 100 or more
Shares in the aggregate (including Shares attributable to individual accounts
under the Savings Plans), even if such owners have separate stock certificates
for fewer than 100 of such Shares. Any Odd Lot Owner wishing to tender all such
Shares beneficially owned by such shareholder pursuant to this Offer must
complete the box captioned "Odd Lots" in the Letter of Transmittal (or, with
respect to Participants in the Savings Plans who are Odd Lot Owners, the
Direction Form (as defined below) sent to such Participants) and, if applicable,
on the Notice of Guaranteed Delivery and must properly indicate in the section
entitled "Price (In Dollars) Per Share At Which Shares Are Being Tendered" in
the Letter of Transmittal (or the Direction Form, if applicable) the price at
which such Shares are being tendered, except that a shareholder may check the
box under the section entitled "Odd Lots" indicating that the shareholder is
tendering all of shareholder's Shares (including Shares attributable to
individual accounts under the Savings Plans) at the Purchase Price. See Section
3. Odd Lot Owners whose Shares are purchased pursuant to the Offer will avoid
both the payment of brokerage commissions (provided the shareholder's Shares are
held in their own name and the shareholder tenders directly to the Depositary)
and any applicable odd lot discounts payable on a sale of their Shares in
transactions on a stock exchange, including the NYSE.
Purchaser also reserves the right, but will not be obligated, to purchase
all Shares validly tendered by all shareholders who tendered any Shares
beneficially owned at or below the Purchase Price and who, as a result of
proration, would then beneficially own an aggregate of, fewer than 100 Shares.
If Purchaser exercises this right, it will increase the number of Shares that it
is offering to purchase in the Offer by the number of Shares purchased through
the exercise of such right.
3. PROCEDURE FOR TENDERING SHARES
PROPER TENDER OF SHARES. For Shares to be validly tendered pursuant to the
Offer:
(i) the certificates for such Shares (or confirmation of receipt of such
Shares pursuant to the procedures for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) with any required signature
guarantees, and any other documents required by the Letter of Transmittal,
must be received prior to 12:00 Midnight, New York City time, on the
Expiration Date by the Depositary at its address set forth on the back cover
of this Offer to Purchase; or
(ii) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below.
AS SPECIFIED IN INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, EACH SHAREHOLDER
DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST PROPERLY INDICATE IN THE
SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING
TENDERED" IN THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $0.25) AT
WHICH SUCH SHAREHOLDER'S SHARES ARE BEING TENDERED, EXCEPT THAT A SHAREHOLDER
MAY CHECK THE BOX IN THE SECTION OF THE LETTER OF TRANSMITTAL UNDER THE ONE
ENTITLED "ODD LOTS" INDICATING THAT THE SHAREHOLDER IS TENDERING SUCH
SHAREHOLDER'S SHARES AT THE PURCHASE PRICE. Shareholders desiring to tender
Shares at more than one price must complete separate Letters of Transmittal for
each price at which Shares are being tendered, except that the same Shares
cannot be tendered (unless properly withdrawn previously in accordance with the
terms of the Offer) at more than one price. IN ORDER TO VALIDLY TENDER SHARES,
ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH
LETTER OF TRANSMITTAL.
In addition, Odd Lot Owners who tender all Shares must complete the section
entitled "Odd Lots" on the Letter of Transmittal (or, in the case of Savings
Plans Participants holding Odd Lots, the Direction Form sent to such
Participants (see SAVINGS PLANS, below)) and, if applicable, on the Notice of
Guaranteed Delivery, in order to qualify for the preferential treatment
available to Odd Lot Owners as set forth in Section 2.
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SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required on the Letter of Transmittal if (i) the Letter of Transmittal is signed
by the registered holder(s) of Shares (which term, for purposes of this Section,
includes any participant in The Depository Trust Company (the "Book-Entry
Transfer Facility") whose name appears on a security position listing as the
holder(s) of Shares) tendered therewith and payment and delivery are to be made
directly to such registered holder(s), or (ii) if Shares are tendered for the
account of a firm or other entity that is a member in good standing of the
Security Transfer Agent's Medallion Program, the New York Stock Exchange
Medallion Program, the Stock Exchange Medallion Program or other entity which is
an "eligible guarantor institution," as such term is defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (each such entity, an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of
the Letter of Transmittal. If a certificate representing Shares is registered in
the name of a person other than the signer of a Letter of Transmittal, or if
payment is to be made, or Shares not purchased or tendered are to be issued, to
a person other than the registered holder, the certificate must be endorsed or
accompanied by an appropriate stock power, in either case signed exactly as the
name of the registered holder appears on the certificate, with the signature on
the certificate or stock power guaranteed by an Eligible Institution. In all
cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares (or a timely confirmation of a book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer Facility as
described below), a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to Shares at the Book-Entry Transfer Facility for purposes of the Offer within
two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Shares by causing the facility to transfer such
Shares into the Depositary's account in accordance with the facility's procedure
for such transfer. Even though delivery of Shares may be effected through
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof), with any required signature guarantees and
other required documents must, in any case, be transmitted to and received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date, or the guaranteed delivery procedure
set forth below must be followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share certificates cannot be delivered to the
Depositary prior to the Expiration Date (or the procedures for book-entry
transfer cannot be completed on a timely basis) or time will not permit all
required documents to reach the Depositary before the Expiration Date, such
Shares may nevertheless be tendered provided that all of the following
conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) the Depositary receives (by hand, mail, overnight courier, telegram
or facsimile transmission), on or prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in
the form Purchaser has provided with this Offer to Purchase (indicating the
price at which Shares are being tendered), including (where required) a
signature guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery; and
11
(iii) the certificates for all tendered Shares in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility), together with a
properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) and any required signature guarantees or other
documents required by the Letter of Transmittal, are received by the
Depositary no later than 5:00 p.m., New York City time, on the third NYSE
trading day after the date the Depositary receives such Notice of Guaranteed
Delivery.
RETURN OF TENDERED SHARES. If any tendered shares are not purchased, or if
less than all Shares evidenced by a shareholder's certificates are tendered,
certificates for unpurchased Shares will be returned as promptly as practicable
after the expiration or termination of the Offer or, in the case of Shares
tendered by book-entry transfer at the Book-Entry Transfer Facility, such Shares
will be credited to the appropriate account maintained by the tendering
shareholder at the Book-Entry Transfer Facility, in each case without expense to
such shareholder.
FEDERAL BACKUP WITHHOLDING TAX. Under the United States federal backup
withholding tax rules, 31% of the gross proceeds payable to a shareholder or
other payee pursuant to the Offer must be withheld and remitted to the United
States Treasury, unless the shareholder or other payee provides such person's
taxpayer identification number (employer identification number or social
security number) to the Depositary and certifies under penalties of perjury that
such number is correct or otherwise establishes an exemption. If the Depository
is not provided with the correct taxpayer identification number ("TIN") or
another adequate basis for exemption, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service (the "IRS") in addition to the backup
withholding. Therefore, each tendering shareholder should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal so as to
provide the information and certification necessary to avoid backup withholding,
unless such shareholder otherwise establishes to the satisfaction of the
Depositary that the shareholder is not subject to backup withholding. If backup
withholding applies, the Depository is required to withhold 31% of the gross
proceeds payable to a shareholder or other payee pursuant to the Offer. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of the tax withheld.
If backup withholding results in overpayment of taxes, a refund may be obtained
from the IRS. Certain shareholders (including, among others, all corporations
and certain foreign shareholders (in addition to foreign corporations)) are not
subject to these backup withholding and reporting requirements rules. In order
for a foreign shareholder to qualify as an exempt recipient, that shareholder
must submit an IRS Form W-8 or a Substitute Form W-8, signed under penalties of
perjury, attesting to that shareholder's exempt status. The applicable form can
be obtained from the Depositary. See Instructions 10 and 11 of the Letter of
Transmittal.
TO PREVENT FEDERAL BACKUP WITHHOLDING TAX EQUAL TO 31% OF THE GROSS PAYMENTS
MADE TO SHAREHOLDERS FOR SHARES PURCHASED PURSUANT TO THE OFFER, EACH
SHAREHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH WITHHOLDING
MUST PROVIDE THE DEPOSITARY WITH THE SHAREHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF TRANSMITTAL.
For a discussion of certain United States federal income tax consequences to
tendering shareholders, see Section 14.
FEDERAL INCOME TAX WITHHOLDING ON FOREIGN SHAREHOLDERS. Even if a foreign
shareholder has provided the required certification as described in the
preceding paragraph to avoid backup withholding, the Depositary will withhold
United States federal income taxes at a rate of 30% of the gross payment payable
to a foreign shareholder or his or her agent unless the Depositary determines
that an exemption from, or a reduced rate of, withholding tax is available
pursuant to a tax treaty or that an exemption from withholding is applicable
because such gross proceeds are effectively connected with the conduct of a
trade or business of the foreign shareholder within the United States. For this
purpose, a foreign shareholder is any shareholder that is not (i) a citizen or
resident of the United States; (ii) a corporation, partnership, or
12
other entity created or organized in or under the laws of the United States, any
State or any political subdivision thereof; (iii) an estate the income of which
is subject to United States federal income taxation regardless of the source of
such income; or (iv) a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all of its substantial decisions. In
order to obtain a reduced rate of withholding pursuant to a tax treaty, a
foreign shareholder must deliver to the Depositary before the payment a properly
completed and executed IRS Form 1001. In order to obtain an exemption from
withholding on the grounds that the gross proceeds paid pursuant to the Offer
are effectively connected with the conduct of a trade or business within the
United States, a foreign shareholder must deliver to the Depositary a properly
completed and executed IRS Form 4224. The Depositary will determine a
shareholder's status as a foreign shareholder and eligibility for a reduced rate
of, or exemption from, withholding by reference to any outstanding certificates
or statements concerning eligibility for a reduced rate of, or exemption from,
withholding (E.G., IRS Form 1001 or IRS Form 4224) unless facts and
circumstances indicate that such reliance is not warranted. A foreign
shareholder may be eligible to obtain a refund of all or a portion of any tax
withheld if such shareholder satisfies one of the "Section 302 tests" for
capital gain treatment described in Section 14 (e.g., the "complete redemption",
"substantially disproportionate" or "not essentially equivalent to a dividend"
tests) or is otherwise able to establish that no withholding or a reduced amount
of withholding is due. Federal backup withholding generally will not apply to
amounts subject to the 30% or a treaty-reduced rate of federal income tax
withholding. Foreign shareholders are urged to consult their own tax advisors
regarding the application of United States federal income tax withholding,
including eligibility for a reduction of or an exemption form withholding tax,
and the refund procedure. See Instructions 10 and 11 of the Letter of
Transmittal.
SAVINGS PLANS. As of June 10, 1999, the Employee Savings Plan held
2,967,044 Shares, the Deferred Compensation Plan held 52,520 Shares, the PHH
Plan held 46,756 Shares and the Savings Incentive Plan held 1,491,423 Shares.
Interests in the Savings Plans are credited to the individual accounts of the
Savings Plans' participants, beneficiaries of deceased participants and
alternate payees pursuant to qualified domestic relations orders (collectively
referred to as "Participants"). Such Shares will, subject to the limitations of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to
the extent applicable, and applicable regulations thereunder, be tendered (or
not tendered) by Xxxxxxx Xxxxx Trust Company of New Jersey ("Xxxxxxx Xxxxx"), as
trustee of the Employee Savings Plan, the Deferred Compensation Plan and the PHH
Plan, and by Xxxxxxxxx & Xxxxxx Trust Company, as trustee of the Savings
Incentive Plan, according to the instructions of Participants. Shares for which
the trustees of the Savings Plans have not received timely instructions from
Participants will not be tendered. The trustees will make available to
Participants whose individual accounts are credited with Shares all documents
furnished to shareholders generally in connection with the Offer. Each such
Participant will also receive a form (the "Direction Form") upon which the
Participant may instruct the trustees of the Savings Plans regarding the Offer.
Each Participant may direct that all, some or none of the Shares attributable to
such Participant's account under the Savings Plans be tendered and the price at
which such Shares are to be tendered. Purchaser, upon the terms and subject to
the conditions of the Offer, will accept for purchase, without proration, all
Shares validly tendered at or below the Purchase Price and not properly
withdrawn prior to the Expiration Date by or on behalf of shareholders who
beneficially owned as of the close of business on June 15, 1999, and continue to
beneficially own as of the Expiration Date, an aggregate of fewer than 100
Shares, including Shares attributable to individual accounts under the Savings
Plans. See Section 2. Purchaser will also provide additional information in a
separate letter with respect to the application of the Offer to Participants in
the Savings Plans. PARTICIPANTS IN SAVINGS PLANS MAY NOT USE THE LETTER OF
TRANSMITTAL TO DIRECT THE TENDER OF SHARES ATTRIBUTABLE TO THEIR INDIVIDUAL
ACCOUNTS, BUT MUST USE THE DIRECTION FORM SENT TO THEM. PARTICIPANTS IN THE
SAVINGS PLANS ARE URGED TO READ THE DIRECTION FORM AND RELATED MATERIALS
CAREFULLY. All proceeds received by the trustees on account of Xxxxxx purchased
from the Savings Plans will be reinvested in the Stable Value Fund Account for
Participants in the Employee Savings
13
Plan, in the Xxxxxxx Xxxxx Retirement Reserves Fund Account for Participants in
the Deferred Compensation Plan and the PHH Plan and in the Evergreen Select
Money Market Fund Account for Participants in the Savings Incentive Plan as soon
as administratively possible and such investments will be credited to
Participants' individual accounts. Participants may contact either the
Metropolitan Life Insurance Company, the plan administrator, or Xxxxxxx Xxxxx,
as applicable, after the reinvestment is complete at (800) I GOT MET and (800)
228-401K, respectively, to have any proceeds of the sale of Shares that were
reinvested in their respective accounts invested in a different manner subject
to the provisions of the Savings Plans.
TENDERING SHAREHOLDER'S REPRESENTATION AND WARRANTY; PURCHASER'S ACCEPTANCE
CONSTITUTES AN AGREEMENT. It is a violation of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a person
acting alone or in concert with others, directly or indirectly, to tender Shares
for such person's own account unless at the time of tender and at the Expiration
Date such person has a "net long position" equal to or greater than the amount
tendered in (a) Shares and will deliver or cause to be delivered such Shares for
the purpose of tender to Purchaser within the period specified in the Offer, or
(b) other securities immediately convertible into, exercisable for or
exchangeable into Shares ("Equivalent Securities") and, upon the acceptance of
such tender, will acquire such Shares by conversion, exchange or exercise of
such Equivalent Securities to the extent required by the terms of the Offer and
will deliver or cause to be delivered such Shares so acquired for the purpose of
tender to Purchaser within the period specified in the Offer. Rule 14e-4 also
provides a similar restriction applicable to the tender or guarantee of a tender
on behalf of another person. A tender of Shares made pursuant to any method of
delivery set forth herein will constitute the tendering shareholder's
representation and warranty to Purchaser that (a) such shareholder has a "net
long position" in Shares or Equivalent Securities being tendered within the
meaning of Rule 14e-4, and (b) such tender of Shares complies with Rule 14e-4.
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the tendering shareholder and Purchaser
upon the terms and subject to the conditions of the Offer.
DETERMINATIONS OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the number of Shares
to be accepted, the price to be paid therefor and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser, in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any or all tenders it determines not to be in proper
form or the acceptance of or payment for which may, in the opinion of
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to
waive any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares or any particular shareholder. No tender of
Shares will be deemed to be properly made until all defects or irregularities
have been cured or waived. None of Purchaser, Cendant, the Dealer Manager, the
Depositary, the Information Agent or any other person is or will be obligated to
give notice of any defects or irregularities in tenders, and none of them will
incur any liability for failure to give any such notice.
CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST
BE DELIVERED TO THE DEPOSITARY AND NOT TO PURCHASER, CENDANT, THE DEALER MANAGER
OR THE INFORMATION AGENT. ANY SUCH DOCUMENTS DELIVERED TO PURCHASER, CENDANT,
THE DEALER MANAGER OR THE INFORMATION AGENT WILL NOT BE FORWARDED TO THE
DEPOSITARY AND THEREFORE WILL NOT BE DEEMED VALIDLY TENDERED.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
payment by Purchaser as provided in this Offer to Purchase, may also be
withdrawn after August 12, 1999.
14
For a withdrawal to be effective, the Depositary must receive (at its
address set forth on the back cover of this Offer to Purchase) a notice of
withdrawal in written, telegraphic or facsimile transmission form on a timely
basis. Such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares tendered, the number
of Shares to be withdrawn and the name of the registered holder, if different
from that of the person who tendered such Shares. If the certificates have been
delivered or otherwise identified to the Depositary, then, prior to the release
of such certificates, the tendering shareholder must also submit the serial
numbers shown on the particular certificates evidencing the Shares and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Shares tendered by an Eligible Institution).
If Shares have been tendered pursuant to the procedure for book-entry transfer
set forth in Section 3, the notice of withdrawal must specify the name and the
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares and otherwise comply with procedures of such facility. All
questions as to the form and validity, including time of receipt, of notices of
withdrawal will be determined by Purchaser, in its sole discretion, which
determination shall be final and binding on all parties. None of Purchaser,
Cendant, the Dealer Manager, the Depositary, the Information Agent or any other
person is or will be obligated to give any notice of any defects or
irregularities in any notice of withdrawal, and none of them will incur any
liability for failure to give any such notice. Withdrawals may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not tendered for
purposes of the Offer. However, withdrawn Shares may be re-tendered before the
Expiration Date by again following any of the procedures described in Section 3.
If Purchaser extends the Offer, is delayed in its purchase of Shares or is
unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may, subject to
applicable law, retain on behalf of Purchaser all tendered Shares, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in this Section 4.
Participants in the Savings Plans should disregard the foregoing procedures
with respect to Shares attributable to their individual accounts in the Savings
Plans and should follow the procedures for withdrawal included in the letter
furnished to such participants by Purchaser.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE
Purchaser will, upon the terms and subject to the conditions of the Offer,
determine a single per Share Purchase Price that it will pay for Shares validly
tendered and not properly withdrawn pursuant to the Offer, taking into account
the number of Shares so tendered and the prices specified by tendering
shareholders, and will accept for payment and pay for (and thereby purchase)
Shares validly tendered at or below the Purchase Price and not properly
withdrawn as soon as practicable after the Expiration Date. For purposes of the
Offer, Purchaser will be deemed to have accepted for payment (and therefore
purchased), subject to proration, Shares that are validly tendered at or below
the Purchase Price and not properly withdrawn when, as and if it gives oral or
written notice to the Depositary of its acceptance of such Shares for payment
pursuant to the Offer. Purchaser may purchase pursuant to the Offer an
additional amount of Shares not to exceed 2% of the outstanding Shares without
amending or extending the Offer. If (i) Purchaser increases or decreases the
price to be paid for Shares, Purchaser increases or decreases the Dealer
Manager's fee, Purchaser increases the number of Shares being sought and such
increase in the number of Shares being sought exceeds 2% of the outstanding
Shares, or Purchaser decreases the number of Shares being sought and (ii) the
Offer is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that notice of
such increase or decrease is first published, sent or given in the manner
specified in Section 15, the Offer will be extended until the expiration of such
period of ten business days. For purposes of the Offer, a "business day" means
any day other than a Saturday, Sunday or federal holiday and consists of the
time period from 12:01 a.m. through 12:00 Midnight, New York City time.
15
Upon the terms and subject to the conditions of the Offer, Purchaser will
purchase and pay a single per Share Purchase Price for all Shares accepted for
payment pursuant to the Offer as soon as practicable after the Expiration Date.
In all cases, payment for Shares tendered and accepted for payment pursuant to
the Offer will be made promptly (subject to possible delay in the event of
proration) but only after timely receipt by the Depositary of certificates for
Shares (or of a timely confirmation of a book-entry transfer of such Shares into
the Depositary's account at the Book-Entry Transfer Facility), a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) and any other required documents.
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from Purchaser and transmitting payment to the tendering shareholders. In the
event of proration, Purchaser will determine the proration factor and pay for
those tendered Shares accepted for payment as soon as practicable after the
Expiration Date. However, Purchaser does not expect to be able to announce the
final results of any such proration until approximately seven business days
after the Expiration Date. UNDER NO CIRCUMSTANCES WILL PURCHASER PAY INTEREST ON
THE PURCHASE PRICE INCLUDING, WITHOUT LIMITATION, BY REASON OF ANY DELAY IN
MAKING PAYMENT. Certificates for all Shares not purchased, including all Shares
tendered at prices greater than the Purchase Price and Shares not purchased due
to proration, will be returned (or, in the case of Shares tendered by book-entry
transfer, such Shares will be credited to the account maintained with the
Book-Entry Transfer Facility by the participant who so delivered such Shares) as
promptly as practicable following the Expiration Date or termination of the
Offer without expense to the tendering shareholder. In addition, if certain
events occur, Purchaser may not be obligated to purchase Shares pursuant to the
Offer. See Section 6.
Purchaser will pay all stock transfer taxes, if any, payable on the transfer
to it of Shares purchased pursuant to the Offer, provided, however, that if
payment of the Purchase Price is to be made to, or (in the circumstances
permitted by the Offer) if unpurchased Shares are to be registered in the name
of, any person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of all stock transfer taxes, if any (whether imposed on
the registered holder or such other person), payable on account of the transfer
to such person will be deducted from the Purchase Price unless evidence
satisfactory to Purchaser of the payment of such taxes or exemption therefrom is
submitted. See Instruction 7 of the Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN
AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF
31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO
THE OFFER. SEE SECTION 3. ALSO SEE SECTION 3 REGARDING FEDERAL INCOME TAX
CONSEQUENCES FOR FOREIGN SHAREHOLDERS.
6. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the purchase of and the payment for Shares tendered, subject to Rule 13e-4 (f)
promulgated under the Exchange Act, if at any time on or after June 16, 1999 and
prior to the Expiration Date (whether any Shares have theretofore been accepted
for payment, purchased or paid for pursuant to the Offer) (i) the Closing (as
defined in the Agreement and Plan of Merger and Reorganization, by and among PHH
Corporation, a Maryland corporation and a wholly owned subsidiary of Cendant
("PHH"), PHH Holdings Corporation, a Texas corporation and a wholly-owned
subsidiary of PHH ("Holdings"), Avis and Avis Fleet Leasing and Management
Corporation, a Texas corporation and a wholly owned subsidiary of Avis ("Avis
Fleet"), dated as of May 22, 1999 (the "Merger Agreement")) pursuant to the
Merger Agreement shall not have been consummated in accordance with the terms of
the Merger Agreement, or (ii) any of the following events shall have occurred
(or shall have been determined
16
by Purchaser to have occurred) that, in Purchaser's judgment in any such case
and regardless of the circumstances giving rise thereto (including any action or
omission to act by Purchaser or Cendant), makes it inadvisable to proceed with
the Offer or with such acceptance for payment or payment:
(a) there shall have been threatened, instituted or be pending before
any court, agency, authority or other tribunal any action, suit or
proceeding by any government or governmental, regulatory or administrative
agency or authority or by any other person, domestic or foreign, or any
judgment, order or injunction entered, enforced or deemed applicable by any
such court, authority, agency or tribunal, which (i) challenges or seeks to
make illegal, or to delay or otherwise directly or indirectly to restrain,
prohibit or otherwise affect the making of the Offer, the acquisition of
Shares pursuant to the Offer or is otherwise related in any manner to, or
otherwise affects, the Offer, or (ii) could, in the reasonable judgment of
Purchaser, materially affect the business, condition (financial or other),
income, operations or prospects of Cendant and its subsidiaries, taken as a
whole, or otherwise materially impair in any way the contemplated future
conduct of the business of Cendant and its subsidiaries, taken as a whole,
or materially impair the Offer's contemplated benefits to Purchaser or
Cendant; or
(b) there shall have been any action threatened or taken, or any
approval withheld, or any statute, rule or regulation invoked, proposed,
sought, promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer or Cendant or any of its subsidiaries, by any
government or governmental, regulatory or administrative authority or agency
or tribunal, domestic or foreign, which, in the reasonable judgment of
Purchaser, would or might directly or indirectly result in any of the
consequences referred to in clause (i) or (ii) of paragraph (a) above; or
(c) there shall have occurred (i) the declaration of any banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory); (ii) any general suspension of trading
in, or limitation on prices for, securities on any United States national
securities exchange or in the over-the-counter market; (iii) the
commencement of a war, armed hostilities or any other national or
international crisis directly or indirectly involving the United States;
(iv) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event which, in
the reasonable judgment of Purchaser might materially affect, the extension
of credit by banks or other lending institutions in the United States; (v)
any significant decrease in the market price of Shares or in the market
prices of equity securities generally in the United States or any change in
the general political, market, economic or financial conditions in the
United States or abroad that could have in the reasonable judgment of
Purchaser a material adverse effect on the business, condition (financial or
otherwise), income, operations or prospects of Cendant and its subsidiaries,
taken as a whole, or on the trading in Shares or on the proposed financing
of the Offer; (vi) in the case of any of the foregoing existing at the time
of the announcement of the Offer, a material acceleration or worsening
thereof; or (vii) any decline in either the Dow Xxxxx Industrial Average or
the S&P 500 Composite Index by an amount in excess of 10% measured from the
close of business on June 16, 1999; or
(d) any change or changes shall have occured or be threatened in the
business, condition (financial or other), income, operations or prospects of
Cendant and its subsidiaries, taken as a whole, which in the reasonable
judgment of Purchaser is or may be material to Cendant and its subsidiaries
taken as a whole; or
(e) a tender or exchange offer with respect to some or all Shares (other
than the Offer), or a merger or acquisition proposal for Cendant, shall have
been proposed, announced or made by another person or shall have been
publicly disclosed, or Purchaser shall have learned that a person or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) shall have
acquired or proposed to acquire beneficial ownership of more than 5% of the
outstanding Shares, or any new group shall have been formed that
beneficially owns more than 5% of the outstanding Shares; or
(f) any person or group shall have filed a Notification and Report Form
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 reflecting an
intent to acquire Cendant or any Shares; or
17
(g) the Merger Agreement shall have been terminated.
The foregoing conditions are for Purchaser's sole benefit and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition (including any action or omission by Purchaser) or may be waived by
Purchaser in whole or in part. Purchaser's failure at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right, and each
such right shall be deemed an ongoing right that may be asserted at any time and
from time to time. In certain circumstances, if Purchaser waives any of the
foregoing conditions, it may be required to extend the Expiration Date of the
Offer. Any determination by Purchaser concerning the events described above and
any related judgment or decision by Purchaser regarding the inadvisability of
proceeding with the purchase of or payment for any Shares tendered will be final
and binding on all parties.
7. PRICE RANGE OF SHARES; DIVIDENDS
Shares are listed and principally traded on the NYSE under the symbol "CD".
The high and low sales prices per Share on the NYSE Composite Tape as compiled
from published financial sources for the periods indicated are listed below:
HIGH LOW
------- -------
1997
1st Quarter................................................................. $27 1/2 $22 1/2
2nd Quarter................................................................. 27 19 1/4
3rd Quarter................................................................. 31 7/8 23 5/16
4th Quarter................................................................. 34 3/8 25 1/2
1998
1st Quarter................................................................. 41 1/2 32 1/8
2nd Quarter................................................................. 41 11/16 17
3rd Quarter................................................................. 22 7/8 10 1/16
4th Quarter................................................................. 20 3/4 6 1/2
1999
1st Quarter................................................................. 22 9/16 14 7/8
2nd Quarter (through June 15, 1999)......................................... 20 3/4 15 1/2
The closing per Share sales price as reported on the NYSE Composite Tape on
June 15, 1999, the last full trading day before the announcement of the Offer,
was $19.75. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS OF THE MARKET
PRICE OF THE SHARES.
Cendant's dividend policy is to retain its earnings for the development and
expansion of its business and the repayment of indebtedness and it does not
anticipate paying dividends on Shares in the foreseeable future.
8. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
Purchaser is making the Offer to (i) improve Cendant's capital structure for
the benefit of Cendant shareholders, by using certain of the proceeds to be
realized by Cendant upon the disposition of the Fleet Business and (ii) afford
to those shareholders who desire liquidity an opportunity to sell all or a
portion of their Shares without the usual transaction costs associated with open
market sales. After the Offer is completed, Purchaser expects Cendant to have
sufficient cash flow and access to other sources of capital to fund its
businesses.
Cendant's Board of Directors believes that Cendant's financial condition and
outlook and current market conditions make this an attractive time to repurchase
a portion of the outstanding Shares. In addition, Xxxxxxx's Board of Directors
believes that, given Cendant's business, assets and prospects, the purchase of
Shares pursuant to the Offer by Purchaser is an attractive investment that will
benefit Cendant and its remaining shareholders. The Offer provides shareholders
who are considering a sale of all or a portion of their Shares the opportunity
to determine the price or prices (not greater than $22.50 nor less
18
than $19.75 per Share) at which they are willing to sell their Shares and, if
any such Shares are purchased pursuant to the Offer, to sell those Shares for
cash to Purchaser without the usual costs associated with a market sale. The
Offer gives shareholders an opportunity to sell their Shares at a price equal to
or greater than the prevailing market prices of the Shares immediately prior to
the announcement of the Offer. The Offer would also allow Odd Lot Owners (whose
Shares are held in their own name and who tender directly to the Depositary)
whose Shares are purchased pursuant to the Offer to avoid both the payment of
brokerage commissions and any applicable odd lot discounts payable on sales of
odd lots on a securities exchange. To the extent the purchase of Shares in the
Offer results in a reduction in the number of shareholders of record, the costs
to Cendant for services to shareholders should be reduced. Shareholders who
determine not to accept the Offer will increase their proportionate interest in
Cendant's equity, and therefore in Cendant's future earnings and assets, subject
to Cendant's right to issue additional Shares and other equity securities in the
future.
EACH OF THE RESPECTIVE BOARDS OF DIRECTORS OF PURCHASER AND CENDANT HAS
APPROVED THE OFFER. HOWEVER, SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER
TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES
AT WHICH SHARES SHOULD BE TENDERED. NONE OF PURCHASER, CENDANT, THEIR RESPECTIVE
BOARDS OF DIRECTORS, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY
MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING SHARES AND NEITHER PURCHASER, CENDANT NOR THEIR RESPECTIVE BOARDS
OF DIRECTORS HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. EXCEPT
AS SET FORTH IN SECTION 9, PURCHASER AND CENDANT HAVE BEEN ADVISED THAT NONE OF
THEIR RESPECTIVE DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES
PURSUANT TO THE OFFER. SEE SECTION 9.
As of June 11, 1999, except as described below, no person was known by
Purchaser or Cendant to be the beneficial owner of more than 5% of the
outstanding Shares. Purchaser and Cendant understand from publicly available
reports to the Commission that Capital Research and Management Company may be
deemed to beneficially own 105,145,240 outstanding Shares or approximately 14%
(11% assuming the exercise of all outstanding Options, the conversion of all
outstanding FELINE PRIDES and 3% Notes and the conversion of the New FELINE
PRIDES) of the outstanding Shares; and Massachusetts Financial Services Company
may be deemed to beneficially own 55,904,878 outstanding Shares or approximately
7% (6% assuming the exercise of all outstanding Options, the conversion of all
outstanding FELINE PRIDES and 3% Notes and the conversion of the New FELINE
PRIDES) of the outstanding Shares. If Purchaser purchases 50,000,000 Shares
pursuant to the Offer, assuming no Shares owned by Capital Research and
Management Company or Massachusetts Financial Services Company are tendered in
the Offer, 105,145,240 and 55,904,878 Shares would represent 15% and 8%,
respectively, of the outstanding Shares (12% and 6%, respectively, assuming the
exercise of all outstanding Options, the conversion of all outstanding FELINE
PRIDES and 3% Notes and the conversion of the New FELINE PRIDES).
In November 1998, Cendant's Board of Directors had authorized the repurchase
of up to $1.0 billion of the then outstanding Shares (the "Repurchase Program").
Shares were to be purchased from time to time in the open market or unsolicited
negotiated transactions, including block purchases. The timing of the Repurchase
Program and number of Shares repurchased was to be dictated by overall financial
and market conditions. During the first quarter of 1999, Cendant's Board of
Directors authorized an additional $600 million for Share repurchases under the
Repurchase Program. Since December 1998, Cendant has repurchased 83,892,700
Shares for approximately $1.6 billion under the Repurchase Program. Rule 13e-4
under the Exchange Act prohibits Purchaser and Cendant from making any purchases
of Shares until 10 business days after the Expiration Date, other than pursuant
to the Offer. Thereafter, Cendant may resume the Repurchase Program if further
authorization is received by the Board of Directors. Any Share purchases under
the Repurchase Program or otherwise may be on the same terms as, or on terms
more or less favorable to shareholders than, the terms of the Offer. Any future
purchases by Cendant, either
19
pursuant to the Repurchase Program or otherwise, will depend on numerous
factors, including the market price of Shares, the results of the Offer,
Cendant's business and financial condition and general economic and market
conditions. The consideration paid for Xxxxxx purchased in the Offer will not be
counted in the aggregate amount of the repurchase authorization under the
Repurchase Program.
Any Shares purchased pursuant to the Offer will be transferred directly to
Purchaser from the Depositary and retained by Purchaser as treasury stock
(unless and until Cendant and Purchaser determine to retire such Shares) and be
available for issue without further shareholder action (except as required by
applicable law or, if retired, the rules of any securities exchange on which
Shares are listed) for purposes including, but not limited to, the acquisition
of other businesses, raising of additional capital for use in Cendant's
businesses, and satisfaction of obligations under existing or future employee
benefit plans. Cendant and Purchaser have no current plan for issuance of Shares
repurchased pursuant to the Offer.
Except as disclosed in this Offer to Purchase, neither Purchaser nor Cendant
currently has any plans or proposals that relate to or would result in (a) the
acquisition by any person of additional securities of Cendant or the disposition
of securities of Cendant; (b) an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving Cendant or any or all of its
subsidiaries; (c) other than as previously publicly announced, a sale or
transfer of a material amount of assets of Cendant or any of its subsidiaries;
(d) any change in the present Board of Directors or management of Cendant; (e)
any material change in the present dividend rate or policy, or indebtedness or
capitalization of Cendant; (f) any other material change in Cendant's corporate
structure or business; (g) any change in Cendant's Certificate of Incorporation
or By-Laws or any actions which may impede the acquisition of control of Cendant
by any person; (h) a class of equity security of Cendant being delisted from a
national securities exchange; (i) a class of equity security of Cendant becoming
eligible for termination of registration pursuant to Section 12(g)(4) of the
Exchange Act; or (j) the suspension of Cendant's obligation to file reports
pursuant to Section 15(d) of the Exchange Act.
9. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING SHARES
As of June 11, 1999, there were 768,183,412 Shares outstanding and
107,042,510 Shares issuable upon exercise of all outstanding vested Options. As
of June 11, 1999, all directors and executive officers of Cendant and its
subsidiaries (including Purchaser) as a group beneficially owned an aggregate of
41,442,592 Shares (including 38,659,719 Shares issuable upon the exercise of
Options exercisable within 60 days of such date), which constituted
approximately 5% of the outstanding Shares (including Shares issuable if Options
held by Cendant's directors and executive officers exercisable within 60 days of
such date were exercised) at such time. Xxxxxxxxx has been advised that Xxxxxx
X. Xxxxxxx, Vice Chairman and Director of Cendant (who intends to retire within
30 days of the Offer in connection with the divestiture of the Fleet Business),
intends to tender Shares in the Offer. If Purchaser purchases 50,000,000 Shares
pursuant to the Offer (approximately 7% of the outstanding Shares as of June 11,
1999), and assuming the repurchase of all Shares tendered by Xx. Xxxxxxx and
that no other director or executive officer tenders Shares pursuant to the Offer
(as is intended by the directors and executive officers), then after the
purchase of Shares pursuant to the Offer, all directors and executive officers
of Cendant and its subsidiaries as a group would beneficially own approximately
5% of the outstanding Shares (including 38,659,719 Shares issuable if Options
held by Cendant's directors and executive officers exercisable within 60 days of
such date were exercised).
As of June 11, 1999, no director or executive officer of Cendant and its
subsidiaries had beneficial ownership of more than 1% of the outstanding Shares,
except Xxxxx X. Xxxxxxxxx, Chairman of the Board, President and Chief Executive
Officer of Cendant, whose beneficial ownership was approximately 3% of the
outstanding Shares (including Shares issuable if Options held by Xxxxxxx's
directors and executive officers exercisable within 60 days of such date were
exercised). If Purchaser purchases 50,000,000 Shares pursuant to the Offer,
assuming no Shares beneficially owned by Xx. Xxxxxxxxx are tendered in the Offer
(as is intended by Xx. Xxxxxxxxx) Shares beneficially owned by Xx. Xxxxxxxxx
would
20
represent approximately 3% of the outstanding Shares (including Shares issuable
if Options held by Cendant's directors and executive officers exercisable within
60 days of such date were exercised).
Except as set forth in Section 8 hereof or in Schedule I hereto, based on
the Purchaser's and Cendant's records and information provided to Purchaser and
Cendant by their respective directors, executive officers, associates and
subsidiaries, neither Purchaser, Cendant nor any of their associates or
subsidiaries or persons controlling Cendant nor, to the best of Purchaser's and
Cendant's knowledge, any of the directors or executive officers of Purchaser or
Cendant or any of their subsidiaries, nor any associates or subsidiaries of any
of the foregoing, has effected any transactions in Shares during the 40 business
days prior to the date hereof.
Except as set forth in this Offer to Purchase, neither Purchaser, Cendant
nor any person controlling Cendant nor, to Purchaser's and Cendant's knowledge,
any of their respective directors or executive officers, is a party to any
contract, arrangement, understanding or relationship with any other person
relating, directly or indirectly, to the Offer with respect to any securities of
Cendant (including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies, consents or
authorizations).
10. SOURCE AND AMOUNT OF FUNDS
Assuming that Purchaser purchases 50,000,000 Shares pursuant to the Offer at
the maximum specified purchase price of $22.50 per Share, Purchaser expects the
maximum aggregate cost, including all taxes, fees and expenses applicable to the
Offer, to be approximately $1,127,000,000.
Purchaser intends to finance the Offer and to pay related taxes, fees and
expenses, from the cash proceeds realized from the repayment of intercompany
indebtedness resulting from the disposition of the Fleet Business. The Merger
Agreement in connection with the disposition of the Fleet Business provides,
among other things, that Avis Fleet will acquire all of the capital stock and
other equity interests of all of the subsidiaries of Holdings in consideration
for the issuance by Avis Fleet of approximately $360 million of convertible
preferred stock of Avis Fleet and the assumption and repayment by Avis Fleet of
approximately $1.44 billion of intercompany indebtedness owed to PHH. The merger
is presently expected to close on or about June 30, 1999. The closing of the
Merger is conditioned upon receipt by Avis Fleet of financing necessary to
consummate the transaction and other conditions customary for transactions of
this type.
The Offer is conditioned upon the closing of the Merger in order to (i)
finance the Offer, and (ii) pay related taxes, fees and expenses. If the
divestiture of the Fleet Business has not been consummated prior to the initial
Expiration Date in an amount sufficient to finance Purchaser's purchase of
Shares pursuant to the Offer and to pay related taxes, fees and expenses,
Purchaser intends to extend the Expiration Date from time to time for a period
not to extend beyond such time as the Merger is consummated or the Merger
Agreement has been terminated in accordance with its terms, and the other
conditions to the Offer have been satisfied or waived.
A copy of the Merger Agreement has been filed as an exhibit to Purchaser's
Issuer Tender Offer Statement on Schedule 13E-4. Reference is made to such
exhibit for a more complete description of the Merger Agreement.
11. CERTAIN INFORMATION ABOUT CENDANT
This Offer to Purchase contains forward looking statements with respect to
Cendant's expectations or belief concerning future events. These statements are
based on Cendant's current expectations and the current economic environment.
Cendant cautions that these statements are not guarantees of future performance.
They involve a number of risks and uncertainties that are difficult to predict.
Actual results could differ materially from those expressed or implied in the
forward-looking statements. Important assumptions and other important factors
that could cause actual results to differ materially from those in
21
the forward-looking statements are specified in Cendant's filings with the
Commission, including Cendant's Annual Report on Form 10-K/A and Quarterly
Reports on Form 10-Q, including the resolution of the pending class action
litigation against Cendant and Cendant's ability to implement its plan to divest
non-strategic assets.
SUMMARY. Cendant is one of the foremost consumer and business services
companies in the world. Cendant was created through the merger of HFS
Incorporated ("HFS") into CUC International Inc. ("CUC") in December 1997 with
the resultant corporation being renamed Cendant Corporation. Cendant provides
the fee-based services formerly provided by each of CUC and HFS, including
travel services, real estate services and membership-based consumer services, to
Cendant's customers throughout the world.
Cendant operates in four principal divisions-travel related services, real
estate related services, alliance marketing related services and other consumer
and business services. Cendant's business provides a wide range of complementary
consumer and business services, which together represent seven business segments
(excluding the Fleet Business). The travel related services businesses
facilitate vacation timeshare exchanges, and franchise car rental and hotel
businesses; the real estate related services businesses franchise real estate
brokerage business, provide home buyers with mortgages and assist in employee
relocation; and the alliance marketing related services businesses provide an
array of value driven products and services. Cendant's other consumer and
business services, include car parks and vehicle emergency support and rescue
services in the United Kingdom, credit information services, financial products
and other consumer-related services.
As a franchisor of hotels, residential real estate brokerage offices, car
rental operations and tax preparation services, Cendant licenses the owners and
operation of independent businesses to use its brand names. Cendant does not own
or operate hotels, real estate brokerage offices, car rental operations or tax
preparation offices (except for certain company-owned Xxxxxxx Xxxxxx offices
which Cendant intends to franchise). Instead, Cendant provides its franchise
customers with services designed to increase their revenue and profitability.
SHAREHOLDER LITIGATION. Since Cendant's April 15, 1998 announcement of the
discovery of accounting irregularities in the former CUC business units, and
prior to the date of this Offer to Purchase, 70 lawsuits claiming to be class
actions, two lawsuits claiming to be brought derivatively on Cendant's behalf
and several individual lawsuits and arbitrations have been filed against Cendant
and other defendants. The plaintiffs in these proceedings assert, among other
things, various claims under the federal securities laws including claims under
Sections 11, 12 and 15 of the Securities Act of 1933 and Sections 10(b), 14(a)
and 20(a) of and Rules 10b-5 and 14a-9 under the Securities Exchange Act of 1934
and state statutory and common laws, including claims that financial statements
previously issued by Cendant and CUC allegedly were materially false and
misleading and caused the price of our securities to be artificially inflated.
In addition, the staff of the Commission and the United States Attorney for
the District of New Jersey are conducting investigations relating to the
accounting irregularities. The Commission staff has advised Cendant that its
inquiry should not be construed as an indication by the Commission or its staff
that any violations of law have occurred. While Cendant has made all adjustments
considered necessary as a result of the findings of the Investigations and the
restatement of our financial statements for 1997, 1996 and 1995 and the first
six months of 1998, Cendant can provide no assurances that additional
adjustments will not be required as a result of these government investigations.
Other than the PRIDES litigation discussed below, Xxxxxxx does not believe
that it is feasible to predict or determine the final outcome or resolution of
these proceedings and investigations or to estimate the amounts or potential
range of loss with respect to the resolution of these proceedings and
investigations. In addition, the timing of the final resolution of these
proceedings and investigations is uncertain. The possible outcomes or
resolutions of these proceedings and investigations could include judgments
against Cendant or settlements and could require substantial payments by
Cendant. Cendant's management believes that adverse outcomes in such proceedings
and investigations or any other resolutions
22
(including settlements) could have a material impact on Cendant's financial
condition, results of operations and cash flows.
On March 17, 1999, Cendant announced that it reached a final settlement
agreement with plaintiff's counsel representing the class of holders of
Cendant's PRIDES securities who purchased their securities on or prior to April
15, 1998 ("eligible persons") to settle their class action claims against
Cendant. Under the final settlement agreement, eligible persons will receive a
new security -- a Right -- for each PRIDES security held on April 15, 1998.
Cendant had originally announced a preliminary agreement in principle to settle
such claims on January 7, 1999. The final agreement maintained the basic
structure and accounting treatment of the preliminary agreement. On June 7,
1999, the District Court for the District of New Jersey, where the PRIDES
litigation is pending, entered an order approving the settlement. Claims based
upon purchases of PRIDES made after April 15, 1998, are not covered by this
settlement. Current holders of PRIDES will not receive any Rights (unless they
also held PRIDES on April 15, 1998).
Cendant recorded an after-tax charge of approximately $228 million, or $0.26
per diluted share ($351 million pre-tax), in the fourth quarter of 1998
associated with the agreement to settle such PRIDES claims. Cendant recorded an
increase in additional paid-in capital of $350 million offset by a decrease in
retained earnings of $228 million resulting in a net increase in stockholders'
equity of $122 million as a result of the prospective issuance of the Rights. As
a result, the settlement should not reduce net book value. In addition, the
settlement is not expected to reduce 1999 earnings per share unless Cendant's
common stock price materially appreciates.
FOR ADDITIONAL INFORMATION REGARDING THE SHAREHOLDER LITIGATION DESCRIBED
ABOVE REFERENCE IS MADE TO THE ANNUAL REPORT ON FORM 10-K/A FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998 AND THE QUARTERLY REPORT ON FORM 10-Q FOR THE THREE
MONTHS ENDED MARCH 31, 1999, THAT ARE HEREBY INCORPORATED HEREIN BY REFERENCE.
HISTORICAL FINANCIAL INFORMATION. The following table sets forth summary
historical consolidated financial information of Cendant and its subsidiaries.
The historical financial information for fiscal years ended December 31, 1997
and 1998 has been derived from, and should be read in conjunction with, the
audited consolidated financial statements of Cendant as reported in Cendant's
Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998 and is
hereby incorporated herein by reference. In addition, the historical financial
information for that portion of fiscal year 1999 presented is unaudited. Such
historical financial information for fiscal year 1999 was set forth in Cendant's
Quarterly Report on Form 10-Q for the quarter and three months ended March 31,
1999 and is hereby incorporated herein by reference. The summary historical
financial information should be read in conjunction with, and is qualified in
its entirety by reference to, the financial statements and the related notes
thereto from which it has been derived.
Cendant had previously restated its financial results for 1997, 1996 and
1995 and the six months ended June 30, 1998 and 1997 as a result of accounting
irregularities which were first discovered by Cendant in April, 1998. On April
15, 1998, Cendant announced that in the course of transferring responsibility
for Cendant's accounting functions as a result of the merger involving HFS and
CUC and in the course of preparing for the reporting of first quarter 1998
financial results, Cendant noted accounting irregularities in certain CUC
business units. As a result, Cendant as well as its Audit Committee, immediately
began intensive investigations (the "Investigations").
On July 14, 1998, Cendant announced that the accounting irregularities were
greater than those initially discovered in April 1998 and that the
irregularities affected the accounting records of the majority of the CUC
business units. On August 13, 1998, Cendant announced that the Investigations
undertaken by Xxxxxxx were complete. On August 27, 1998, Cendant announced that
its Audit Committee had submitted its report (the "Report") to the Board of
Directors examining the accounting irregularities and its conclusions regarding
responsibility for those actions. A copy of the Report has been filed as an
exhibit to Cendant's Current Report on Form 8-K dated August 28, 1998.
Copies of the reports described above may be inspected or obtained from the
Commission in the manner specified in "--Additional Information" below.
23
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
YEAR ENDED THREE MONTHS ENDED
-------------------------- ------------------------
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1997(1) 1998(2)(3)(4) 1998(2) 1999(2)
------------ ------------ ----------- -----------
STATEMENT OF INCOME DATA
Net revenues................................................. $ 4,051.9 $ 5,086.6 $ 1,119.9 $ 1,304.9
------------ ------------ ----------- -----------
Income from continuing operations before income taxes,
minority interest, extraordinary gain and cumulative effect
of accounting change....................................... 229.2 291.7 315.8 303.0
------------ ------------ ----------- -----------
Income from continuing operations before extraordinary gain
and cumulative effect of accounting change................. 49.1 145.7 196.3 181.4
Loss from discontinued operations, net of tax................ (9.6) (10.8) (23.4) (12.1)
Gain on sale of discontinued operations, net of tax.......... -- 404.7 -- 192.7
Extraordinary gain, net of tax............................... 26.4 -- -- --
Cumulative effect of accounting change, net of tax........... (283.1) -- -- --
------------ ------------ ----------- -----------
Net income (loss)............................................ $ (217.2) $ 539.6 $ 172.9 $ 362.0
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Income (loss) per share:
Basic
Income from continuing operations before extraordinary gain
and cumulative effect of accounting change............... $ 0.06 $ 0.17 $ 0.23 $ 0.23
Loss from discontinued operations.......................... (0.01) (0.01) (0.02) (0.02)
Gain on sale of discontinued operations.................... -- 0.48 -- 0.24
Extraordinary gain......................................... 0.03 -- -- --
Cumulative effect of accounting change..................... (0.35) -- -- --
------------ ------------ ----------- -----------
Net income (loss).......................................... $ (0.27) $ 0.64 $ 0.21 $ 0.45
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Diluted
Income from continuing operations before extraordinary gain
and cumulative effect of accounting change............... $ 0.06 $ 0.16 $ 0.22 $ 0.22
Loss from discontinued operations.......................... (0.01) (0.01) (0.02) (0.01)
Gain on sale of discontinued operations.................... -- 0.46 -- 0.22
Extraordinary gain......................................... 0.03 -- -- --
Cumulative effect of accounting change..................... (0.35) -- -- --
------------ ------------ ----------- -----------
Net income (loss).......................................... $ (0.27) $ 0.61 $ 0.20 $ 0.43
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Weighted average shares
Basic...................................................... 811.2 848.4 838.7 800.1
Diluted.................................................... 851.7 880.4 908.5 854.4
Ratio of earnings to fixed charges........................... 1.44 1.29 3.65 2.52
24
AT AT
-------------------------- ----------------------
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1997(1) 1998(2)(3)(4) 1998(2) 1999(2)
------------ ------------ ---------- ----------
BALANCE SHEET DATA
Working capital............................................ $ 136.4 $ 1,715.6 $ 612.5 $ 685.7
Assets under management and mortgage programs.............. 6,443.7 7,511.9 6,667.0 7,193.5
Total assets............................................... 14,041.5 20,202.1 15,748.5 18,867.1
Long-term debt............................................. 1,246.0 3,362.9 1,056.9 3,357.7
Debt under management and mortgage programs................ 5,602.6 6,896.8 6,095.4 6,327.3
Shareholders' equity....................................... 3,921.4 4,835.6 4,263.4 4,093.4
Book value per common share................................ 4.71 5.80 5.04 5.26
------------------------
NOTES TO SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(1) Includes merger-related costs and other unusual charges related to
continuing operations of $704.1 million ($504.7 million, after tax or $0.58
per diluted share) primarily associated with the Cendant merger in December
1997 and merger with PHH Corporation in April 1997.
(2) The operating results of the following acquisitions, accounted for under the
purchase method of accounting, are included since the respective dates of
acquisition: (i) National Parking Corporation in April 1998; (ii) The Harpur
Group Ltd. in January 1998; and (iii) Xxxxxxx Xxxxxx, Inc. in January 1998.
(3) Includes a non-cash charge of $50.0 million ($32.2 million, after tax or
$0.04 per diluted share) related to the write off of certain equity
investments in interactive membership businesses and impaired goodwill
associated with the National Library of Poetry, a Cendant subsidiary.
(4) Includes charges of: (i) $433.5 million ($281.7 million, after tax or $0.32
per diluted share) for the costs of terminating the proposed acquisitions of
American Bankers Insurance Group, Inc. and Providian Auto and Home Insurance
Company; (ii) $351.0 million ($228.2 million, after tax or $0.26 per diluted
share) associated with the final agreement to settle the PRIDES securities
class action suit; and (iii) $121.0 million ($78.7 million, after tax or
$0.09 per diluted share) comprised of the costs of the investigations into
previously discovered accounting irregularities at the former CUC business
units, including incremental financing costs and separation payments,
principally to Cendant's former chairman. The aforementioned charges were
partially offset by a credit of $67.2 million ($43.7 million, after tax or
$0.05 per diluted share) associated with changes in the estimate of
liabilities originally recorded in connection with 1997 merger-related costs
and other unusual charges.
PRO FORMA FINANCIAL INFORMATION. The following summary unaudited pro forma
consolidated financial information gives effect to the disposition of the Fleet
Business pursuant to the Merger Agreement and the purchase of Shares pursuant to
the Offer based on certain assumptions described in the Notes to the Unaudited
Pro Forma Consolidated Financial Statements contained in Annex A hereto. The
summary unaudited pro forma consolidated financial information has been derived
from, and should be read in conjunction with, the Unaudited Pro Forma
Consolidated Financial Statements included in Annex A to this Offer to Purchase.
The unaudited pro forma consolidated statement of income data for the year ended
December 31, 1998 and for the three months ended March 31, 1999 are presented as
if the disposition of the Fleet Business and the purchase of Shares pursuant to
the Offer had occurred on January 1, 1998. The unaudited pro forma consolidated
balance sheet data as of March 31, 1999 is presented as if the disposition of
the Fleet Business and the purchase of Shares pursuant to the Offer had occurred
on March 31, 1999. The summary unaudited pro forma consolidated financial
information should also be read in conjunction with the consolidated financial
statements and related notes thereto of Cendant, as included in Cendant's (i)
Annual Report on Form 10-K/A for the year ended December 31, 1998, which was
filed with the Commission on May 13, 1999; and (ii) Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1999, which was filed with the
Commission on May 17, 1999. The summary unaudited pro forma consolidated
financial information does not purport to be indicative of the results that
would actually have
25
been obtained had the disposition of the Fleet Business pursuant to the Merger
Agreement and the purchase of Shares pursuant to the Offer at the indicated
purchase prices been completed at the dates indicated or that may be obtained in
the future.
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1998 MARCH 31, 1999
------------------------------------ -------------------------------------
PRO FORMA (1) PRO FORMA (1)
------------------------- --------------------------
AT $19.75 AT $22.50 AT $19.75 AT $22.50
PURCHASE PURCHASE PURCHASE PURCHASE
HISTORICAL PRICE PRICE HISTORICAL PRICE PRICE
--------- ------------ ----------- --------- ------------ ------------
STATEMENT OF INCOME DATA
Net revenues.............................. $ 5,086.6 $ 4,743.6 $ 4,735.6 $ 1,304.9 $ 1,214.1 $ 1,212.2
--------- ------------ ----------- --------- ------------ ------------
Income from continuing operations before
income taxes and minority interest...... 291.7 179.4 171.4 303.0 281.2 279.3
--------- ------------ ----------- --------- ------------ ------------
Income from continuing operations......... 145.7 $ 70.2 $ 64.8 181.4 $ 167.3 $ 166.0
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Loss from discontinued operations, net of
tax..................................... (10.8) (12.1)
Gain on sale of discontinued operations,
net of tax.............................. 404.7 192.7
--------- ---------
Net income................................ $ 539.6 $ 362.0
--------- ---------
--------- ---------
Income (loss) per share:
Basic
Income from continuing operations....... $ 0.17 $ 0.09 $ 0.08 $ 0.23 $ 0.22 $ 0.22
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Loss from discontinued operations....... (0.01) (0.02)
Gain on sale of discontinued
operations............................ 0.48 0.24
--------- ---------
Net income.............................. $ 0.64 $ 0.45
--------- ---------
--------- ---------
Diluted
Income from continuing operations....... $ 0.16 $ 0.08 $ 0.08 $ 0.22 $ 0.21 $ 0.21
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Loss from discontinued operations....... (0.01) (0.01)
Gain on sale of discontinued
operations............................ 0.46 0.22
--------- ---------
Net income.............................. $ 0.61 $ 0.43
--------- ---------
--------- ---------
Weighted average shares
Basic................................... 848.4 798.4 798.4 800.1 750.1 750.1
Diluted................................. 880.4 830.4 830.4 854.4 804.4 804.4
Ratio of earnings to fixed charges........ 1.29 1.20 1.18 2.52 2.99 2.95
26
AT MARCH 31, 1999
----------------------------------
AT PRO FORMA (1)
DECEMBER -----------------------
31, 1998 AT $19.75 AT $22.50
--------- PURCHASE PURCHASE
HISTORICAL HISTORICAL PRICE PRICE
--------- --------- ------------ ---------
BALANCE SHEET DATA
Working capital....................................................... $ 1,715.6 $ 685.7 $ 1,011.1 $ 1,011.1
Assets under management and mortgage programs......................... 7,511.9 7,193.5 3,320.0 3,320.0
Total assets.......................................................... 20,202.1 18,867.1 14,484.9 14,484.9
Long-term debt........................................................ 3,362.9 3,357.7 3,336.9 3,336.9
Debt under management and mortgage programs........................... 6,896.8 6,327.3 2,902.8 3,040.3
Shareholders' equity.................................................. 4,835.6 4,093.4 3,943.8 3,806.3
Book value per common share........................................... 5.80 5.26 5.42 5.23
------------------------
NOTE TO SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(1) The summary unaudited pro forma consolidated financial information gives
effect to the proposed disposition of the Fleet Business to Avis for $1.44
billion in assumed intercompany debt of Holdings which will be subsequently
repaid and the issuance of $360 million in convertible preferred stock of
Avis Fleet. The pro forma information also gives effect to the use of
proceeds from such disposition for the purchase of Shares pursuant to the
Offer and the repayment of debt under management and mortgage programs. The
pro forma information assumes that 50,000,000 Shares are purchased by
Purchaser pursuant to the Offer at prices of $19.75 per Share and $22.50 per
Share, respectively.
ADDITIONAL INFORMATION. Cendant is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning Cendant's directors and officers, their remuneration, options granted
to them, the principal holders of Cendant's securities and any material interest
of such persons in transactions with Cendant is required to be disclosed in
proxy statements distributed to Cendant's shareholders and filed with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 000 Xxxxx Xxxxxx, X.X., Xxxx 0000, Xxxxxxxxxx, X.X. 00000; at its
regional offices located at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000-2511; and 7 World Trade Center, New York, New York 10048. Copies
of such material may also be obtained by mail, upon payment of the Commission's
customary charges, from the Public Reference Section of the Commission at
Judiciary Plaza, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx X.X. 00000. The Commission
also maintains a Web site on the World Wide Web at xxxx://xxx.xxx.xxx that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy statements and other information concerning Cendant also can be
inspected at the offices of the NYSE, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
on which the Shares are listed.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT
Purchaser's purchase of Shares pursuant to the Offer will reduce the number
of Shares that might otherwise trade publicly and is likely to reduce the number
of shareholders. Nonetheless, Purchaser and Cendant believe that there will
still be a sufficient number of Shares outstanding and publicly traded following
the Offer to ensure a continued trading market in the Shares. Based on the
published guidelines of the NYSE, Purchaser and Cendant do not believe that
Purchaser's purchase of Shares pursuant to the Offer will cause the remaining
Shares of Cendant to be delisted from such exchange.
Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of Shares. Purchaser and
27
Cendant believe that, following the purchase of Shares pursuant to the Offer,
Shares will continue to be "margin securities" for purposes of the Federal
Reserve Board's margin regulations.
Any Shares purchased pursuant to the Offer will be transferred directly to
Purchaser from the Depositary and retained by Purchaser as treasury stock
(unless and until Cendant and Purchaser determine to retire such Shares) and be
available for issue without further shareholder action (except as required by
applicable law or, if retired, the rules of any securities exchange on which
Shares are listed) for purposes including, but not limited to, the acquisition
of other businesses, raising of additional capital for use in Cendant's
businesses, and satisfaction of obligations under existing or future employee
benefit plans. Cendant and Purchaser have no current plan for the issuance of
Shares repurchased pursuant to the Offer.
Shares are registered under the Exchange Act, which requires, among other
things, that Cendant furnish certain information to its shareholders and to the
Commission and comply with the Commission's proxy rules in connection with
meetings of Cendant's shareholders. Purchaser and Cendant believe that
Purchaser's purchase of Shares pursuant to the Offer will not result in the
Shares becoming eligible for deregistration under the Exchange Act.
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
Neither Purchaser, Cendant nor any of their subsidiaries is aware of any
license or regulatory permit material to the business of Cendant or any of its
subsidiaries (including the Purchaser) that might be adversely affected by
Purchaser's acquisition of Shares as contemplated in the Offer or of any
approval or other action by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, that would be required for
Purchaser's or Cendant's acquisition or ownership of Shares as contemplated by
the Offer. Should any such approval or other action be required, Purchaser and
Cendant currently contemplate that they will seek such approval or other action.
Purchaser cannot predict whether it may determine that it is required to delay
the acceptance for payment of, or payment for, Shares tendered pursuant to the
Offer pending the outcome of any such matter. There can be no assurance that any
such approval or other action, if needed, would be obtained or would be obtained
without substantial conditions or that the failure to obtain any such approval
or other action might not result in adverse consequences to Cendant's business.
Purchaser's obligations under the Offer to accept for payment and pay for Shares
are subject to certain conditions. See Section 6.
14. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following describes certain U.S. federal income tax consequences
relating to the Offer to holders of Shares that are U.S. holders (as defined
below). The discussion contained in this summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code") Treasury regulations promulgated
thereunder, administrative pronouncements and judicial decisions, all as in
effect as of the date hereof and all of which are subject to change (possibly
with retroactive effect). This summary discusses only Shares held as capital
assets within the meaning of Section 1221 of the Code and does not address all
of the tax consequences that may be relevant to certain shareholders in light of
their particular circumstances or to certain types of shareholders subject to
special treatment under the Code (including, without limitation, certain
financial institutions, dealers in securities or commodities, insurance
companies, tax-exempt organizations, persons who hold Shares as a position in a
"straddle" or as a part of a "hedging" or "conversion" transaction for U.S.
federal income tax purposes or persons who received their Shares through the
exercise of employee stock options or otherwise as compensation). In particular,
this discussion applies only to U.S. holders. This summary also does not address
the state, local or foreign tax consequences of participating in the Offer. For
purposes of this discussion, a "U.S. holder" means:
- a citizen or resident of the United States;
- a corporation, partnership, or other entity created or organized in the
United States or under the laws of the United States or of any political
subdivision thereof;
- an estate the income of which is includible in gross income for United
States federal income tax purposes regardless of its source; or
28
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all of its substantial decisions.
Holders of Shares who are not U.S. holders should consult their tax advisors
regarding the U.S. federal income tax consequences and any applicable foreign
tax consequences of the Offer and should also see Section 3 for a discussion of
the applicable U.S. withholding rules and the potential for obtaining a refund
of all or a portion of any tax withheld.
EACH SHAREHOLDER SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR
CONSEQUENCES TO THE SHAREHOLDER PARTICIPATING IN THE OFFER.
CHARACTERIZATION OF THE PURCHASE. The purchase of a U.S. holder's Shares by
Purchaser pursuant to the Offer will be a taxable transaction for U.S. federal
income tax purposes. As a consequence of the purchase, a U.S. holder will,
depending on the U.S. holder's particular circumstances, be treated either as
having sold the U.S. holder's Shares or as having received a distribution in
respect of stock from Cendant.
Under Sections 302 and 304 of the Code, a U.S. holder whose Shares are
purchased by Purchaser pursuant to the Offer will be treated as having sold its
Shares, and thus will recognize capital gain or loss if the purchase:
- results in a "complete redemption" of the U.S. holder's equity interest in
Cendant;
- results in a "substantially disproportionate" redemption with respect to
the U.S. holder; or
- is "not essentially equivalent to a dividend" with respect to the U.S.
holder.
Each of these tests (the "Section 302 tests") is explained more fully below.
If a U.S. holder satisfies any of the Section 302 tests described above, the
U.S. holder will be treated as if it sold its Shares to Purchaser and will
recognize capital gain or loss equal to the difference between the amount of
cash received pursuant to the Offer and the U.S. holder's adjusted tax basis in
the Shares surrendered in exchange therefor. This gain or loss will be long-term
capital gain or loss if the U.S. holder's holding period for the Shares that
were sold exceeds one year as of the date of purchase by Purchaser pursuant to
the Offer. Certain limitations apply to the deductibility of capital losses by
U.S. holders. Gain or loss must be determined separately for each block of
Shares (i.e., Shares acquired at the same cost in a single transaction) that is
purchased by Purchaser from a U.S. holder pursuant to the Offer. A U.S. holder
may be able to designate (generally through its broker) which blocks of Shares
it wishes to tender pursuant to the Offer if less than all of its Shares are
tendered pursuant to the Offer, and the order in which different blocks will be
purchased by Purchaser in the event of proration pursuant to the Offer. U.S.
holders should consult their tax advisors concerning the mechanics and
desirability of that designation.
If a U.S. holder does not satisfy any of the Section 302 tests described
above, the purchase of a U.S. holder's Shares by Purchaser pursuant to the Offer
will not be treated as a sale or exchange under Section 302 of the Code with
respect to the U.S. holder. Instead, the entire amount received by a U.S. holder
with respect to the purchase of its Shares by Purchaser pursuant to the Offer
will be treated as a dividend distribution to the U.S. holder with respect to
its Shares under Section 301 of the Code, taxable at ordinary income tax rates,
to the extent, first, of the U.S. holder's share of Purchaser's current and
accumulated earnings and profits (as defined for U.S. federal income tax
purposes) and, second, of the U.S. holder's share of Cendant's current and
accumulated earnings and profit. To the extent the amount exceeds the U.S.
holder's share of Purchaser's and Cendant's current and accumulated earnings and
profits, the excess first will be treated as a tax-free return of capital to the
extent of the U.S. holder's adjusted tax basis in its Shares and any remainder
will be treated as capital gain (which may be long-term capital gain as
described above). The determination of whether a corporation has earnings and
profits is complex and the legal standards to be applied are subject to
uncertainties and ambiguities. Additionally, whether a corporation has current
earnings and profits can be determined only at the end of the taxable year.
Accordingly, it is unclear whether Cendant and Purchaser will have sufficient
current and accumulated earnings and profits to cover the amount of any payment
made by Purchaser to U.S. holders to
29
purchase the U.S. holder's Shares pursuant to the Offer. To the extent that a
purchase of a U.S. holder's Shares by Purchaser pursuant to the Offer is treated
as the receipt by the U.S. holder of a dividend, the U.S. holder's adjusted tax
basis in the purchased Shares will be added to any Shares retained by the U.S.
holder (and may be lost if the U.S. holder does not actually retain any stock
ownership in Cendant).
CONSTRUCTIVE OWNERSHIP OF STOCK AND OTHER ISSUES. In applying each of the
Section 302 tests, U.S. holders must take into account not only Shares that they
actually own but also Shares they are treated as owning under the constructive
ownership rules of Section 318 of the Code, as modified by Section 304 of the
Code. Pursuant to the constructive ownership rules, a U.S. holder is treated as
owning any Shares that are owned (actually and in some cases constructively) by
certain related individuals and entities as well as Shares that the U.S. holder
has the right to acquire by exercise of an option or by conversion or exchange
of a security. Due to the factual nature of the Section 302 tests described
below, U.S. holders should consult their tax advisors to determine whether
Purchaser's purchase of their Shares pursuant to the Offer qualifies for sale
treatment in their particular circumstances.
If a U.S. holder sells Shares to persons other than Purchaser at or about
the time the U.S. holder also sells Shares to Purchaser pursuant to the Offer,
and the sales effected by the U.S. holder are part of an overall plan to reduce
or terminate the U.S. holder's proportionate interest in Cendant, then the sales
to persons other than Purchaser may be integrated with the U.S. holder's sale of
Shares pursuant to the Offer and, if integrated, should be taken into account in
determining whether the U.S. holder satisfies any of the Section 302 tests
described below. U.S. holders should consult their tax advisors regarding the
treatment of other sales of Shares which may be integrated with the purchase of
their Shares by Purchaser pursuant to the Offer.
Purchaser and Cendant cannot predict whether or the extent to which the
Offer will be oversubscribed. If the Offer is oversubscribed, proration of
tenders pursuant to the Offer will cause Purchaser to accept fewer Shares than
are tendered. Therefore, no assurance can be given that Purchaser will purchase
a sufficient number of a U.S. holder's Shares pursuant to the Offer to ensure
that the U.S. holder receives sale treatment, rather than dividend treatment,
for U.S. federal income tax purposes pursuant to the rules discussed below.
SECTION 302 TESTS. One of the following tests must be satisfied in order
for the purchase of Shares by Purchaser pursuant to the Offer to be treated as a
sale or exchange for federal income tax purposes.
a. COMPLETE TERMINATION TEST. The purchase of a U.S. holder's Shares by
Purchaser pursuant to the Offer will result in a "complete redemption" of the
U.S. holder's equity interest in Cendant if all of the Shares that are actually
owned by the U.S. holder are sold pursuant to the Offer and the Shares that are
constructively owned by the U.S. holder are sold pursuant to the Offer or, with
respect to Shares owned by certain related individuals, the U.S. holder
effectively waives, in accordance with Section 302(c) of the Code, attribution
of Shares which otherwise would be considered as constructively owned by the
U.S. holder. U.S. holders wishing to satisfy the "complete redemption" test
through waiver of the constructive ownership rules should consult their tax
advisors.
b. SUBSTANTIALLY DISPROPORTIONATE TEST. The purchase of a U.S. holder's
Shares by Purchaser pursuant to the Offer will result in a "substantially
disproportionate" redemption with respect to the U.S. holder if, among other
things, the percentage of the then outstanding Shares actually and
constructively owned by the U.S. holder immediately after the purchase is less
than 80% of the percentage of the Shares actually and constructively owned by
the U.S. holder immediately before the purchase (treating as outstanding all
Shares purchased pursuant to the Offer).
c. NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. The purchase of a U.S.
holder's Shares by Purchaser pursuant to the Offer will be treated as "not
essentially equivalent to a dividend" if the reduction in the U.S. holder's
proportionate interest in Cendant as a result of the purchase constitutes a
"meaningful reduction" given the U.S. holder's particular circumstances. Whether
the receipt of cash by a shareholder who sells Shares pursuant to the Offer will
be "not essentially equivalent to a dividend" will depend upon the shareholder's
particular facts and circumstances. The Internal Revenue Service has
30
indicated in a published revenue ruling that even a small reduction in the
percentage interest of a U.S. holder whose relative stock interest in a publicly
held corporation is minimal (e.g., an interest of less than 1%) and who
exercises no control over corporate affairs should constitute a "meaningful
reduction." U.S. holders should consult their tax advisors as to the application
of this test in their particular circumstances.
CORPORATE SHAREHOLDER DIVIDEND TREATMENT. In the case of a corporate U.S.
holder, to the extent that any amounts received pursuant to the Offer are
treated as a dividend, such holder may be eligible for the dividends-received
deduction. The dividends-received deduction is subject to certain limitations
and may not be available if a corporate U.S. holder does not satisfy certain
holding period requirements with respect to its Shares or if its Shares are
treated as "debt financed portfolio stock" within the meaning of Section 246A of
the Code. In addition, any amount received by a corporate U.S. holder pursuant
to the Offer that is treated as a dividend will constitute an "extraordinary
dividend" under Section 1059 of the Code (except as may otherwise be provided in
regulations yet to be promulgated by the Treasury department). Accordingly, a
corporate U.S. holder will be required under Section 1059(a) of the Code to
reduce its adjusted tax basis (but not below zero) in its Shares by the
non-taxed portion of the
extraordinary dividend (i.e., the portion of the dividend for which a deduction
is allowed) and, if such portion exceeds the corporate U.S. holder's adjusted
tax basis in its shares, to treat the excess as gain from the sale of such
Shares in the year in which the dividend is received. These basis reduction and
gain recognition rules would be applied by taking into account only the
corporate U.S. holder's adjusted tax basis in the Shares that were sold pursuant
to the Offer, without regard to other Shares that the corporate U.S. holder may
continue to own. Corporate U.S. holders should consult their own tax advisors as
to the application of Section 1059 of the Code to the Offer, and to the tax
consequences of dividend treatment in their particular circumstances.
FOREIGN SHAREHOLDERS. Generally, the Depositary will withhold United States
federal income tax at a rate of 30% from the gross proceeds paid pursuant to the
Offer to a foreign shareholder (as defined in Section 3) or his agent, unless
the Depositary determines that an exemption from, or a reduced rate of,
withholding tax is available pursuant to a tax treaty or that an exemption from
withholding otherwise applies. See Section 3 for a discussion of the applicable
U.S. withholding rules and the potential for being subject to reduced
withholding and for obtaining a refund of all or a portion of any tax withheld.
SHAREHOLDERS WHO DO NOT RECEIVE CASH PURSUANT TO THE OFFER. Shareholders
whose Shares are not purchased by Purchaser pursuant to the Offer will not incur
any tax liability as a result of the consummation of the Offer.
BACKUP WITHHOLDING. See Section 3 with respect to the application of United
States federal backup withholding tax.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
EACH SHAREHOLDER IS URGED TO CONSULT ITS TAX ADVISOR TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES TO IT OF THE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL AND FOREIGN TAX LAWS.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS
Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, and regardless of whether or not any of the events set
forth in Section 6 shall have occurred or shall be deemed by Purchaser to have
occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and payment for, any Shares by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. During any such extension, all Shares previously tendered
and not properly withdrawn will remain subject to the Offer and to the rights of
a tendering shareholder to withdraw such shareholder's shares. Purchaser also
expressly reserves the right, in its sole discretion, to terminate the Offer and
not accept for payment or pay for any Shares not theretofore accepted for
payment or paid for or, subject to applicable law, to postpone payment for
Shares upon the occurrence of any of the conditions specified in Section 6
hereof by giving oral or written notice of such termination or postponement to
the Depositary and making a public announcement thereof.
31
Additionally, in certain circumstances, if Purchaser waives any of the
conditions of the Offer set forth in Section 6, it may be required to extend the
Expiration Date of the Offer. Purchaser's reservation of the right to delay
payment for Shares that it has accepted for payment is limited by Rule
13e-4(f)(5) promulgated under the Exchange Act, which requires that Purchaser
must pay the consideration offered or return Shares tendered promptly after
termination or withdrawal of a tender offer. Subject to compliance with
applicable law, Purchaser further reserves the right, in its sole discretion,
and regardless of whether any of the events set forth in Section 6 shall have
occurred or shall be deemed by Purchaser to have occurred, to amend the Offer in
any respect (including, without limitation, by decreasing or increasing the
consideration offered in the Offer to holders of Shares or by decreasing or
increasing the number of Shares being sought in the Offer). Amendments to the
Offer may be made at any time and from time to time effected by public
announcement thereof, such announcement, in the case of an extension, to be
issued no later than 9:00 a.m., New York City time, on the next business day
after the last previously scheduled or announced Expiration Date. Any public
announcement made pursuant to the Offer will be disseminated promptly to
shareholders in a manner reasonably designated to inform shareholders of such
change. Without limiting the manner in which Purchaser may choose to make any
public announcement, except as provided by applicable law (including Rule
13e-4(e)(2) promulgated under the Exchange Act), Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Xxxxx News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act, which require
that the minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer
(other than a change in price or a change in percentage of securities sought)
will depend upon the facts and circumstances, including the relative materiality
of such terms or information. If (i) Purchaser increases or decreases the price
to be paid for Shares, Purchaser increases or decreases the Dealer Manager's
fee, Purchaser increases the number of Shares being sought and such increase in
the number of Shares being sought exceeds 2% of the outstanding Shares, or
Purchaser decreases the number of Shares being sought, and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given, the Offer will extended
until the expiration of such period of ten business days.
16. FEES AND EXPENSES
Purchaser has retained Banc of America to act as the Dealer Manager in
connection with the Offer for which services Banc of America will receive a fee
for its services as Dealer Manager of $1 million. Purchaser also has agreed to
reimburse Banc of America for its out of pocket expenses, including the fees and
expenses of legal counsel, and to indemnify Banc of America and certain related
persons against certain liabilities in connection with the Offer and Banc of
America's engagement as Dealer Manager in connection with the Offer, including
certain liabilities under the federal securities laws. Banc of America and
certain of its affiliates have rendered various investment banking and other
advisory services to Cendant and its subsidiaries, and have acted as lender and
as administrator of certain credit facilities of Cendant and its subsidiaries
and of an asset securitization facility relating to the Fleet Business, in the
past, for which it has received customary compensation, and can be expected to
render similar services to Cendant and its subsidiaries in the future. Purchaser
also has retained ChaseMellon Shareholder Services, L.L.C. ("ChaseMellon") to
act as the Information Agent and as the Depositary in connection with the Offer.
ChaseMellon will receive reasonable and customary compensation for its services.
Purchaser will also reimburse ChaseMellon for out-of-pocket expenses, including
reasonable attorneys' fees, and has agreed to indemnify ChaseMellon against
certain liabilities in connection with the Offer, including certain liabilities
under the federal securities laws. Banc of America and ChaseMellon may contact
shareholders by mail, telephone, telex, telegraph and personal interviews, and
may request brokers, dealers and other
32
nominee shareholders to forward materials relating to the Offer to beneficial
owners. ChaseMellon has not been retained to make solicitations or
recommendations in connection with the Offer.
Purchaser will not pay fees or commissions to any broker, dealer, commercial
bank, trust company or other person (other than to the Dealer Manager and
Information Agent as described above) for soliciting any Shares pursuant to the
Offer. Purchaser will, however, on request, reimburse such persons for customary
handling and mailing expenses incurred in forwarding materials in respect of the
Offer to the beneficial owners for which they act as nominees. No such broker,
dealer, commercial bank or trust company has been authorized to act as
Purchaser's agent for purposes of the Offer. Purchaser will pay (or cause to be
paid) any stock transfer taxes on its purchase of Shares, except as otherwise
provided in Instruction 7 of the Letter of Transmittal.
17. MISCELLANEOUS
Purchaser is not aware of any jurisdiction where the making of the Offer is
not in compliance with applicable law. If Purchaser becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, Purchaser will make a good faith effort to comply with such law.
If, after such good faith effort, Purchaser cannot comply with such law, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares residing in such jurisdiction. In any jurisdiction the
securities or blue sky laws of which require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on Purchaser's behalf by
the Dealer Manager or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
Pursuant to Rule 13e-4 promulgated under the Exchange Act, Purchaser has
filed with the Commission an Issuer Tender Offer Statement on Schedule 13E-4
(the "Schedule 13E-4") which contains additional information with respect to the
Offer. The Schedule 13E-4, including the exhibits and any amendments thereto,
may be examined, and copies may be obtained, at the same places and in the same
manner as is set forth in Section 11 with respect to information concerning
Cendant.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER, CENDANT, THE DEALER MANAGER, THE
INFORMATION AGENT OR THE DEPOSITARY IN CONNECTION WITH THE OFFER OTHER THAN
THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY PURCHASER, CENDANT, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGER.
CENDANT STOCK CORPORATION
June 16, 1999
33
SCHEDULE I
CERTAIN TRANSACTIONS INVOLVING SHARES
Except as set forth below, based upon Purchaser's and Cendant's records and
upon information provided to Purchaser and Cendant by their respective
directors, executive officers, associates and subsidiaries, neither Purchaser,
Cendant nor any of their associates or subsidiaries or persons controlling
Cendant and its subsidiaries (including Purchaser) (of which Purchaser and
Cendant believe there are none) nor, to the best of Purchaser's and Cendant's
knowledge, any of the directors or executive officers of Purchaser and Cendant
or any of their subsidiaries, nor any associates or subsidiary of any of the
foregoing, has effected any transactions in the Shares during the 40 business
days prior to June 16, 1999.
1. From December 1998 to June 16, 1999, Cendant has repurchased an aggregate
of 83,892,700 Shares at an average purchase price of $19.0196 per Share pursuant
to its ongoing Share Repurchase Program, each in open market purchases on the
NYSE. Set forth in the table below is information with regard to Shares
repurchased by Cendant pursuant to the Share Repurchase Program during the past
40 business days:
NUMBER OF
DATE SHARES PRICE(1)
---------------------------------------------------------------------- ----------- ----------
4/28/1999............................................................. 127,000 $ 18.8105
4/29/1999............................................................. 298,500 $ 18.9711
4/30/1999............................................................. 649,900 $ 18.8865
5/3/1999.............................................................. 505,000 $ 18.4872
------------------------
(1) Exclusive of brokerage commission.
2. Cendant issued Options to purchase an aggregate of 7,950,000 Shares to
Cendant's executive officers and directors on April 21, 1999 under Cendant's
option plans, as set forth in the table below:
NUMBER OF EXERCISE
NAME OPTIONS GRANTED PRICE
------------------------------------------------------------- --------------- -------------
Xxxxx X. Xxxxxxxxx........................................... 3,000,000 $ 17.875
Xxxxx X. Xxxxxxx............................................. 600,000 $ 17.875
Xxxxxxx X. Xxxxxx............................................ 600,000 $ 17.875
Xxxxxx X. Xxxxxxx............................................ 400,000 $ 17.875
Xxxxxxx X. Xxxxxx............................................ 600,000 $ 17.875
Xxxx X. Xxxxxxx.............................................. 850,000 $ 17.875
Xxx X. Xxxxxx................................................ 300,000 $ 17.875
Xxxxx X. Xxxxxxx............................................. 500,000 $ 17.875
Xxxxxx X. Xxxx............................................... 500,000 $ 17.875
Xxxxxxx X. Xxxxx............................................. 600,000 $ 17.875
3. Xxxxx X. Xxxxxxx, Senior Executive Vice President and Chief Financial
Officer of Cendant, purchased 10,000 Shares on the open market at a price of
$18.81 per Share on April 28, 1999.
4. Xxx X. Xxxxxx, Executive Vice President and Chief Accounting Officer of
Cendant purchased 29,000 Shares on the open market at a price of $18.90 per
Share on April 29, 1999.
5. Xxxxx X. Xxxxxxxxx, Chairman of the Board, President and Chief Executive
Officer of Cendant, exercised options to purchase 170,000 Shares at a price of
$1.29 per Share on April 23, 1999 and sold 70,000 Shares on the open market at a
price of $20.2188 per Share on such date.
S-1
6. Xxxxxx X. Xxxxxxx, Vice Chairman of Cendant, sold 150,000 Shares on the
open market at an average price of $20.1517 per Share on April 23, 1999. On
April 30, 1999, Xx. Xxxxxxx sold 50,000 Shares on the open market at an average
price of $18.4105 per Share. On May 6, 1999, Xx. Xxxxxxx sold 150,000 Shares on
the open market at an average price of $17.6715 per Share.
7. Xxxxxx X. Xxxx, Executive Vice President, Strategic Development of
Cendant, purchased 5,283.6 Shares at a price of $18.507 per Share on June 10,
1999, through a transaction executed under the Deferred Compensation Plan.
S-2
ANNEX A
CENDANT CORPORATION
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying Unaudited Pro Forma Consolidated Financial Statements of
Cendant give effect to the proposed disposition of the Fleet Business. Pursuant
to the Merger Agreement, Avis will acquire the net assets of the Fleet Business
for $1.44 billion in assumed intercompany debt of Holdings which will be
subsequently repaid to PHH, and the issuance of $360 million in convertible
preferred stock of Avis Fleet. The unaudited pro forma consolidated financial
statements also give effect to the use of proceeds from the disposition of the
Fleet Business for the purchase of Shares pursuant to the Offer and the
repayment of debt under management and mortgage programs (collectively, the
"Transactions"). The pro forma information assumes that Shares are purchased by
Purchaser pursuant to the Offer at prices of $19.75 per Share and $22.50 per
Share, respectively. Cendant beneficially owns approximately 19% of Avis'
outstanding Class A common stock and accounts for such investment utilizing the
equity method. The unaudited pro forma consolidated balance sheet as of March
31, 1999 is presented as if the Transactions had occurred on March 31, 1999. The
unaudited pro forma consolidated statements of income for the year ended
December 31, 1998 and for the three months ended March 31, 1999 are presented as
if the Transactions had occurred on January 1, 1998. Such financial statements
do not purport to present the results of operations of Cendant had the
disposition of the Fleet Business occurred on the dates specified nor are they
necessarily indicative of the operating results that may be achieved in the
future.
The accompanying Unaudited Pro Forma Consolidated Financial Statements of
Cendant are based on certain assumptions and adjustments described in the Notes
thereto, and should be read in conjunction therewith and with the consolidated
financial statements and related notes thereto of Cendant, as included in
Cendant's (i) Annual Report on Form 10-K/A for the year ended December 31, 1998,
which was filed with the Commission on May 13, 1999; and (ii) Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1999, which was filed with
the Commission on May 17, 1999.
A-1
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN MILLIONS)
ASSUMING A $19.75
PURCHASE PRICE
-----------------------
HISTORICAL PRO FORMA
CENDANT ADJUSTMENTS PRO FORMA
---------- ----------- ----------
ASSETS
Current Assets
Cash and cash equivalents............................................. $ 520.7 $ 1,390.0(B) $ 520.7
(1,390.0)(C)
Receivables, net...................................................... 1,600.8 (504.5)(A) 1,096.3
Deferred membership commission costs.................................. 252.5 -- 252.5
Deferred income taxes................................................. 302.7 (14.8)(A) 287.9
Other current assets.................................................. 874.5 (19.2)(A) 855.3
Net assets of discontinued operations................................. 61.8 -- 61.8
---------- ----------- ----------
Total current assets.................................................... 3,613.0 (538.5) 3,074.5
---------- ----------- ----------
Property and equipment, net........................................... 1,399.9 (96.9)(A) 1,303.0
Franchise agreements, net............................................. 1,353.4 -- 1,353.4
Xxxxxxxx, net......................................................... 3,874.7 (181.0)(A) 3,693.7
Other intangibles, net................................................ 734.2 (47.4)(A) 686.8
Other assets.......................................................... 698.4 (4.9)(A) 1,053.5
360.0(B)
---------- ----------- ----------
Total assets exclusive of assets under programs......................... 11,673.6 (508.7) 11,164.9
---------- ----------- ----------
Assets under management and mortgage programs
Net investment in leases and leased vehicles.......................... 3,873.5 (3,873.5)(A) --
Relocation receivables................................................ 620.9 -- 620.9
Mortgage loans held for sale.......................................... 1,955.6 -- 1,955.6
Mortgage servicing rights............................................. 743.5 -- 743.5
---------- ----------- ----------
7,193.5 (3,873.5) 3,320.0
---------- ----------- ----------
Total assets............................................................ $ 18,867.1 $(4,382.2) $ 14,484.9
---------- ----------- ----------
---------- ----------- ----------
See notes to unaudited pro forma consolidated financial statements.
A-2
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
ASSUMING A $19.75
PURCHASE PRICE
-----------------------
HISTORICAL PRO FORMA
CENDANT ADJUSTMENTS PRO FORMA
---------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and other current liabilities........................ $ 1,585.2 $ (852.2)(A) 744.4
11.4(B)
Deferred income....................................................... 1,342.1 (23.1)(A) 1,319.0
---------- ----------- ----------
Total current liabilities............................................... 2,927.3 (863.9) 2,063.4
---------- ----------- ----------
Deferred income....................................................... 234.7 -- 234.7
Long-term debt........................................................ 3,357.7 (20.8)(A) 3,336.9
Deferred income taxes................................................. 38.2 33.9(B) 64.3
(7.8)(A)
Other non-current liabilities......................................... 86.4 -- 86.4
Deferred gain......................................................... -- 180.9(B) 180.9
---------- ----------- ----------
Total liabilities exclusive of liabilities under programs............... 6,644.3 (677.7) 5,966.6
---------- ----------- ----------
Liabilities under management and mortgage programs
Debt.................................................................. 6,327.3 (3,022.0)(A) 2,902.8
(402.5)(C)
---------- ----------- ----------
Deferred income taxes................................................. 328.6 (130.4)(A) 198.2
---------- ----------- ----------
Mandatorily redeemable preferred securities issued by subsidiary........ 1,473.5 -- 1,473.5
Shareholders' equity
Preferred stock, $.01 par value--authorized 10 million shares; none
issued and outstanding.............................................. -- -- --
Common stock, $.01 par value--authorized 2 billion shares; issued
863,046,029......................................................... 8.6 -- 8.6
Additional paid-in capital............................................ 3,960.3 15.9(B) 3,976.2
Retained earnings..................................................... 1,842.2 776.5(B) 2,618.7
Accumulated other comprehensive loss.................................. (120.2) 45.5(A) (74.7)
Treasury stock, at cost, 85.3 million shares--historical and 135.3
million shares--pro forma........................................... (1,597.5) (987.5)(C) (2,585.0)
---------- ----------- ----------
Total shareholders' equity.............................................. 4,093.4 (149.6) 3,943.8
---------- ----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................. $ 18,867.1 $(4,382.2) $ 14,484.9
---------- ----------- ----------
---------- ----------- ----------
See notes to unaudited pro forma consolidated financial statements.
A-3
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
ASSUMING A $19.75
PURCHASE PRICE
------------------------
HISTORICAL PRO FORMA
CENDANT ADJUSTMENTS PRO FORMA
--------- ----------- -----------
REVENUES
Membership and service fees, net..................................... $ 4,883.5 $ (293.9)(A) $ 4,613.2
23.6(D)
Fleet leasing (net of depreciation and interest costs of $1,279.4
historical)........................................................ 88.7 (88.7)(A) --
Other................................................................ 114.4 18.0(E) 130.4
4.5(F)
(6.5)(G)
--------- ----------- -----------
Net revenues........................................................... 5,086.6 (343.0) 4,743.6
--------- ----------- -----------
EXPENSES
Operating............................................................ 1,721.5 (91.6)(A) 1,629.9
Marketing and reservation............................................ 1,158.5 (20.3)(A) 1,138.2
General and administrative........................................... 648.7 (94.2)(A) 554.5
Depreciation and amortization........................................ 314.0 (22.2)(A) 291.8
Other charges
Litigation settlement.............................................. 351.0 -- 351.0
Termination of proposed acquisitions............................... 433.5 -- 433.5
Executive terminations............................................. 52.5 -- 52.5
Investigation-related costs........................................ 33.4 -- 33.4
Merger-related costs and other unusual charges (credits)........... (67.2) 1.3(A) (65.9)
Financing costs.................................................... 35.1 -- 35.1
Interest, net........................................................ 113.9 (3.7)(A) 110.2
--------- ----------- -----------
Total expenses......................................................... 4,794.9 (230.7) 4,564.2
--------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY
INTEREST............................................................. 291.7 (112.3) 179.4
Provision for income taxes............................................. 95.4 (36.8)(H) 58.6
Minority interest, net of tax.......................................... 50.6 -- 50.6
--------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS...................................... $ 145.7 $ (75.5) $ 70.2
--------- ----------- -----------
PER SHARE INFORMATION:
Income from continuing operations
Basic.............................................................. $ 0.17 $ 0.09
Diluted............................................................ $ 0.16 $ 0.08
Weighted Average Shares
Basic.............................................................. 848.4 (50.0)(C) 798.4
Diluted............................................................ 880.4 (50.0)(C) 830.4
See notes to unaudited pro forma consolidated financial statements.
A-4
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
ASSUMING A $19.75
PURCHASE PRICE
------------------------
HISTORICAL PRO FORMA
CENDANT ADJUSTMENTS PRO FORMA
--------- ----------- -----------
REVENUES
Membership and service fees, net..................................... $ 1,247.9 $ (81.0)(A) $ 1,172.6
5.7(D)
Fleet leasing (net of depreciation and interest costs of
$326.4--historical)................................................ 18.6 (18.6)(A) --
Other................................................................ 38.4 -- 41.5
4.5(E)
1.1(F)
(2.5)(G)
--------- ----------- -----------
Net revenues........................................................... 1,304.9 (90.8) 1,214.1
--------- ----------- -----------
EXPENSES
Operating............................................................ 432.4 (30.4)(A) 402.0
Marketing and reservation............................................ 262.2 (5.0)(A) 257.2
General and administrative........................................... 160.6 (24.7)(A) 135.9
Depreciation and amortization........................................ 91.0 (8.1)(A) 82.9
Other charges
Termination of proposed acquisition................................ 7.0 -- 7.0
Investigation-related costs........................................ 1.7 -- 1.7
Merger-related costs and other unusual charges (credits)........... (1.3) -- (1.3)
Interest, net........................................................ 48.3 (0.8)(A) 47.5
--------- ----------- -----------
Total expenses......................................................... 1,001.9 (69.0) 932.9
--------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY
INTEREST............................................................. 303.0 (21.8) 281.2
Provision for income taxes............................................. 106.5 (7.7)(H) 98.8
Minority interest, net of tax.......................................... 15.1 -- 15.1
--------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS...................................... $ 181.4 $ (14.1) $ 167.3
--------- ----------- -----------
PER SHARE INFORMATION:
Income from continuing operations
Basic.............................................................. $ 0.23 $ 0.22
Diluted............................................................ $ 0.22 $ 0.21
Weighted Average Shares
Basic.............................................................. 800.1 (50.0)(C) 750.1
Diluted............................................................ 854.4 (50.0)(C) 804.4
See notes to unaudited pro forma consolidated financial statements.
A-5
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN MILLIONS)
ASSUMING A $22.50
PURCHASE PRICE
-----------------------
HISTORICAL PRO FORMA
CENDANT ADJUSTMENTS PRO FORMA
---------- ----------- ----------
ASSETS
Current Assets
Cash and cash equivalents.............................................. $ 520.7 $ 1,390.0(B) $ 520.7
(1,390.0)(C)
Receivables, net....................................................... 1,600.8 (504.5)(A) 1,096.3
Deferred membership commission costs................................... 252.5 -- 252.5
Deferred income taxes.................................................. 302.7 (14.8)(A) 287.9
Other current assets................................................... 874.5 (19.2)(A) 855.3
Net assets of discontinued operations.................................. 61.8 -- 61.8
---------- ----------- ----------
Total current assets..................................................... 3,613.0 (538.5) 3,074.5
---------- ----------- ----------
Property and equipment, net............................................ 1,399.9 (96.9)(A) 1,303.0
Franchise agreements, net.............................................. 1,353.4 -- 1,353.4
Goodwill, net.......................................................... 3,874.7 (181.0)(A) 3,693.7
Other intangibles, net................................................. 734.2 (47.4)(A) 686.8
Other assets........................................................... 698.4 (4.9)(A) 1,053.5
360.0(B)
---------- ----------- ----------
Total assets exclusive of assets under programs.......................... 11,673.6 (508.7) 11,164.9
---------- ----------- ----------
Assets under management and mortgage programs
Net investment in leases and leased vehicles........................... 3,873.5 (3,873.5)(A) --
Relocation receivables................................................. 620.9 -- 620.9
Mortgage loans held for sale........................................... 1,955.6 -- 1,955.6
Mortgage servicing rights.............................................. 743.5 -- 743.5
---------- ----------- ----------
7,193.5 (3,873.5) 3,320.0
---------- ----------- ----------
Total assets............................................................. $ 18,867.1 $(4,382.2) $ 14,484.9
---------- ----------- ----------
---------- ----------- ----------
See notes to unaudited pro forma consolidated financial statements.
A-6
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
ASSUMING A $22.50
PURCHASE PRICE
-----------------------
HISTORICAL PRO FORMA
CENDANT ADJUSTMENTS PRO FORMA
---------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and other current liabilities......................... $ 1,585.2 $ (852.2)(A) 744.4
11.4(B)
Deferred income........................................................ 1,342.1 (23.1)(A) 1,319.0
---------- ----------- ----------
Total current liabilities................................................ 2,927.3 (863.9) 2,063.4
---------- ----------- ----------
Deferred income........................................................ 234.7 -- 234.7
Long-term debt......................................................... 3,357.7 (20.8)(A) 3,336.9
Deferred income taxes.................................................. 38.2 33.9(B) 64.3
(7.8)(A)
Other non-current liabilities.......................................... 86.4 -- 86.4
Deferred gain.......................................................... -- 180.9(B) 180.9
---------- ----------- ----------
Total liabilities exclusive of liabilities under programs................ 6,644.3 (677.7) 5,966.6
---------- ----------- ----------
Liabilities under management and mortgage programs
Debt................................................................... 6,327.3 (3,022.0)(A) 3,040.3
(265.0)(C)
---------- ----------- ----------
Deferred income taxes.................................................. 328.6 (130.4)(A) 198.2
---------- ----------- ----------
Mandatorily redeemable preferred securities issued by subsidiary......... 1,473.5 -- 1,473.5
Shareholders' equity
Preferred stock, $.01 par value--authorized 10 million shares; none
issued and outstanding............................................... -- -- --
Common stock, $.01 par value--authorized 2 billion shares; issued
863,046,029.......................................................... 8.6 -- 8.6
Additional paid-in capital............................................. 3,960.3 15.9(B) 3,976.2
Retained earnings...................................................... 1,842.2 776.5(B) 2,618.7
Accumulated other comprehensive loss................................... (120.2) 45.5(A) (74.7)
Treasury stock, at cost, 85.3 million shares--historical and 135.3
million shares--pro forma............................................ (1,597.5) (1,125.0)(C) (2,722.5)
---------- ----------- ----------
Total shareholders' equity............................................... 4,093.4 (287.1) 3,806.3
---------- ----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................... $ 18,867.1 $(4,382.2) $ 14,484.9
---------- ----------- ----------
---------- ----------- ----------
See notes to unaudited pro forma consolidated financial statements.
A-7
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
ASSUMING A $22.50
PURCHASE PRICE
------------------------
HISTORICAL PRO FORMA
CENDANT ADJUSTMENTS PRO FORMA
--------- ----------- -----------
REVENUES
Membership and service fees, net...................................... $ 4,883.5 $ (293.9)(A) $ 4,605.2
15.6(D)
Fleet leasing (net of depreciation
and interest costs of $1,279.4--historical)......................... 88.7 (88.7)(A) --
Other................................................................. 114.4 18.0(E) 130.4
4.5(F)
(6.5)(G)
--------- ----------- -----------
Net revenues............................................................ 5,086.6 (351.0) 4,735.6
--------- ----------- -----------
EXPENSES
Operating............................................................. 1,721.5 (91.6)(A) 1,629.9
Marketing and reservation............................................. 1,158.5 (20.3)(A) 1,138.2
General and administrative............................................ 648.7 (94.2)(A) 554.5
Depreciation and amortization......................................... 314.0 (22.2)(A) 291.8
Other charges
Litigation settlement............................................... 351.0 -- 351.0
Termination of proposed acquisitions................................ 433.5 -- 433.5
Executive terminations.............................................. 52.5 -- 52.5
Investigation-related costs......................................... 33.4 -- 33.4
Merger-related costs and other unusual charges (credits)............ (67.2) 1.3(A) (65.9)
Financing costs..................................................... 35.1 -- 35.1
Interest, net........................................................... 113.9 (3.7)(A) 110.2
--------- ----------- -----------
Total expenses.......................................................... 4,794.9 (230.7) 4,564.2
--------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY
INTEREST.............................................................. 291.7 (120.3) 171.4
Provision for income taxes.............................................. 95.4 (39.4)(H) 56.0
Minority interest, net of tax........................................... 50.6 -- 50.6
--------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS....................................... $ 145.7 $ (80.9) $ 64.8
--------- ----------- -----------
PER SHARE INFORMATION:
Income from continuing operations
Basic............................................................... $ 0.17 $ 0.08
Diluted............................................................. $ 0.16 $ 0.08
Weighted Average Shares
Basic............................................................... 848.4 (50.0)(C) 798.4
Diluted............................................................. 880.4 (50.0)(C) 830.4
See notes to unaudited pro forma consolidated financial statements.
A-8
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
ASSUMING A $22.50
PURCHASE PRICE
------------------------
HISTORICAL PRO FORMA
CENDANT ADJUSTMENTS PRO FORMA
--------- ----------- -----------
REVENUES
Membership and service fees, net...................................... $ 1,247.9 $ (81.0)(A) $ 1,170.7
3.8(D)
Fleet leasing (net of depreciation
and interest costs of $326.4--historical)........................... 18.6 (18.6)(A) --
Other................................................................. 38.4 4.5(E) 41.5
1.1(F)
(2.5)(G)
--------- ----------- -----------
Net revenues............................................................ 1,304.9 (92.7) 1,212.2
--------- ----------- -----------
EXPENSES
Operating............................................................. 432.4 (30.4)(A) 402.0
Marketing and reservation............................................. 262.2 (5.0)(A) 257.2
General and administrative............................................ 160.6 (24.7)(A) 135.9
Depreciation and amortization......................................... 91.0 (8.1)(A) 82.9
Other charges
Termination of proposed acquisition................................. 7.0 -- 7.0
Investigation-related costs......................................... 1.7 -- 1.7
Merger-related costs and other unusual charges (credits)............ (1.3) -- (1.3)
Interest, net......................................................... 48.3 (0.8)(A) 47.5
--------- ----------- -----------
Total expenses.......................................................... 1,001.9 (69.0) 932.9
--------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY
INTEREST.............................................................. 303.0 (23.7) 279.3
Provision for income taxes.............................................. 106.5 (8.3)(H) 98.2
Minority interest, net of tax........................................... 15.1 -- 15.1
--------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS....................................... $ 181.4 $ (15.4) $ 166.0
--------- ----------- -----------
PER SHARE INFORMATION:
Income from continuing operations
Basic............................................................... $ 0.23 $ 0.22
Diluted............................................................. $ 0.22 $ 0.21
Weighted Average Shares
Basic............................................................... 800.1 (50.0)(C) 750.1
Diluted............................................................. 854.4 (50.0)(C) 804.4
See notes to unaudited pro forma consolidated financial statements.
A-9
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, UNLESS OTHERWISE NOTED)
(A) The pro forma adjustments reflects the elimination of the historical balance
sheet amounts and operating results of the Fleet Business.
(B) The pro forma balance sheet adjustments reflect the consideration to be
received from Avis in connection with the disposition of the Fleet Business
to Avis and the anticipated gain on disposition, which is calculated as
follows:
Gross cash proceeds.......................................................... $ 1,440.0
Avis Fleet series A cumulative participating 5% redeemable convertible
preferred stock (7.2 million shares)....................................... 360.0
---------
Total consideration.......................................................... 1,800.0
Historical net book value of Fleet Business.................................. 731.4
Transaction costs (i)........................................................ 65.9
Income taxes payable (ii).................................................... 11.4
Deferred tax liabilities (ii)................................................ 33.9
---------
Anticipated gain on disposition.............................................. 957.4
Less: Deferred gain on disposition (iii)..................................... 180.9
---------
Anticipated gain on disposition to be recognized upon consummation (iv)...... $ 776.5
---------
---------
(i) Consists of: (a) $50.0 of cash payments made for professional fees
and bonuses directly related to the Transactions; and (b) a $15.9
charge to equity for the accelerated vesting of Cendant stock
options held by employees of the Fleet Business.
(ii) Reflects the anticipated income tax effects from the disposition of
the Fleet Business.
(iii) Reflects a deferral of 18.9% of the anticipated gain on
disposition, which is equivalent to Cendant's common stock
investment in Avis.
(iv) The anticipated gain upon disposition of the Fleet Business is
reflected as a pro forma adjustment to retained earnings in the
unaudited pro forma consolidated balance sheet as of March 31,
1999, and is not included in the unaudited pro forma consolidated
statements of income.
(C) The pro forma adjustment reflects the utilization of $1,390.0 of net
proceeds ($1,440.0 gross proceeds less $50.0 of transaction costs) to
repurchase 50.0 million Shares pursuant to the Offer and the remaining
proceeds used to repay debt under management and mortgage programs.
The utilization of proceeds at the assumed Purchase Prices is calculated as
follows:
AT $19.75 AT $22.50
--------- ---------
Purchase of 50.0 million Shares...................................................... $ 987.5 $ 1,125.0
Repayment of debt under management and mortgage programs............................. 402.5 265.0
--------- ---------
Net proceeds......................................................................... $ 1,390.0 $ 1,390.0
--------- ---------
--------- ---------
A-10
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, UNLESS OTHERWISE NOTED)
(D) The pro forma income statement adjustment reflects a reduction of interest
expense from the assumed repayment of debt used to finance assets under
management and mortgage programs (See Note C). The interest rate for the
three months ended March 31, 1999 and the year ended December 31, 1998 was
5.71% and 5.87%, respectively, the weighted average interest rates in effect
for such periods. The reduction of interest expense is calculated as
follows:
YEAR ENDED
DECEMBER 31, 1998
--------------------------------
AT $19.75 AT $22.50
PURCHASE PRICE PURCHASE PRICE
--------------- ---------------
Repayment of debt under management and mortgage programs.................... $ 402.5 $ 265.0
Weighted average annual interest rate....................................... 5.87% 5.87%
------ ------
Pro Forma Adjustment........................................................ $ 23.6 $ 15.6
------ ------
------ ------
THREE MONTHS ENDED
MARCH 31, 1999
--------------------------------
AT $19.75 AT $22.50
PURCHASE PRICE PURCHASE PRICE
--------------- ---------------
Repayment of debt under management and mortgage programs.................... $ 402.5 $ 265.0
Weighted average annual interest rate....................................... 5.71% 5.71%
------ ------
$ 23.0 $ 15.1
------ ------
Pro Forma Adjustment........................................................ $ 5.7 $ 3.8
------ ------
------ ------
(E) The pro forma income statment adjustment reflects the preferred stock
dividend payable from Avis Fleet to Cendant on the $360.0 of Avis Fleet
series A cumulative participating convertible preferred stock at a rate of
5% per annum.
(F) The pro forma income statment adjustment reflects the recognition of a
proportional amount of the deferred gain on disposition of the Fleet
Business to Avis. The deferred gain is recognized into income over forty
years, which is consistent with the period in which Avis is expected to
amortize the goodwill generated from their purchase of the Fleet Business.
(G) The pro forma income statment adjustment represents Cendant's equity
interest in Avis' pro forma change in their historical earnings giving
effect to Avis' acquisition of the Fleet Business. The pro forma adjustment
was determined as follows:
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999
------------------- ---------------------
Historical net income of Avis....................................... $ 63.5 $ 15.2
Avis' pro forma income available to common shareholders giving
effect to Avis' acquisition of the Fleet Business................. 34.8 2.8
----- -----
Pro forma differences............................................... 28.7 12.4
Cendant's weighted equity ownership percentage in Avis.............. 22.74% 20.00%
----- -----
Pro forma adjustment................................................ $ 6.5 $ 2.5
----- -----
----- -----
(H) The pro forma adjustment reflects the income tax effects related to the
disposition of the Fleet Business. The pro forma effective tax rate
approximates the historical effective tax rate of Cendant.
A-11
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and certificates for the Shares and any
other required documents should be sent or delivered by each shareholder or such
shareholder's broker, dealer, commercial bank, trust company or other nominee to
the Depositary at its address set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Hand Delivery: By Overnight Delivery: By Mail:
000 Xxxxxxxx, 13(th)
Floor 00 Xxxxxxxxxx Xxxx P.O. Box 3301
New York, New York 10271 Mail Drop-Reorg South Hackensack
Attn: Reorganization Ridgefield Park, New Jersey
Dept. 07660 New Jersey 07606
Attn: Reorganization
Attn: Reorganization Dept. Dept.
Facsimile Transmission:
(000) 000-0000
Confirm Receipt of Facsimile
by Telephone:
(000) 000-0000
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent or the Dealer Manager, as set
forth below. Shareholders may also contact their broker, dealer, commercial bank
or trust company for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
000 Xxxx 00(xx) Xxxxxx, 00(xx) Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Call Toll Free: 0-000-000-0000
Bankers and Brokers may call: (000) 000-0000
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Call: (000) 000-0000
