Cendant Cancels Deal to Buy ABI

Cendant Corp., buffeted in recent months by losses stemming from accounting fraud, has reversed course on its aggressive acquisition strategy to concentrate on getting its financial operations in order and stimulating internal growth.

Last week, the direct marketer of membership services terminated its proposed

$3.1 million purchase of American Bankers Insurance and announced a $1 billion share repurchase program that is intended to promote investor confidence and prop up its lagging stock price.

Cendant, Parsippany, NJ, closed down 7/8 at 9 7/8 Oct. 14. The company called off a deal to buy Providian Auto and Home Insurance earlier this month while its only remaining acquisition, RAC Motor Services, is pending regulatory approval in the United Kingdom.

Cendant chairman/CEO Henry Silverman said the ABI deal no longer made sense at his company's current stock price. Cendant has paid ABI a $400 million termination fee, which will lead to a $280 million after-tax charge in the fourth quarter.

“We are pleased to resolve uncertainty created in the market regarding the potential impact of the ABI transaction on our capital structure,” Silverman said in a prepared statement. “All our excess financial resources for the foreseeable future will be devoted to retiring both debt and equity, to build shareholder value and maintain appropriate credit protection.”

Cendant will concentrate on retiring the $3.25 billion credit facility, part of which it intended to use for the ABI acquisition. BT Alex Brown analyst Christopher Feiss called the latest moves “much more positive than negative.”

The company now shifts to an organic growth model that draws on the synergies between its many recognized brands and is exemplified by its new look Welcome Wagon direct mail program. Cendant franchise Century 21 was a founding advertiser, and some of its other franchises also have established specialized Welcome Wagon programs.

Welcome Wagon, the greeting service which has sent representatives door-to-door with coupons and other gifts for newlyweds and new homeowners for 70 years, has been merged with the Getting To Know You package insert program run by Cendant subsidiary Getko Direct Response, Jericho, NY. Recipients will now receive advertising messages in the mail, and 1,300 of 1,800 Welcome Wagon reps will be laid off. The remainder will join Getko's combined sales force.

Consumer visits are being discontinued because of changes in lifestyle patterns resulting from more women in the work force. Getko CEO Joel Zychick said that while in-home visits had dropped from 1.5 million a year in 1968 to only a half million this year, Getting To Know You has seen the opposite trend. In such an environment, mail was deemed a more efficient and targeted medium.

Welcome Wagon will offer a variety of marketing options to 70,000 local merchants and national franchises looking to target new homeowners, including new homeowner lists and databases, cooperative mailings and direct marketing programs like the new Pre-Mover Planner it introduced at last week's DMA fall show.

“With direct mail, merchants will be introduced to every new homeowner,” Zychick said. “New homeowner lists are the most popular list to reach people when they are changing buying habits.”

Through its proprietary data sources and phone verification, Getko tracks the moving patterns of 3.5 million consumers a year and can identify consumers who are planning to move in the next 12 months as well as those who have just moved. An insurance agent in Chicago, for example, can advertise in a mailing to a couple in California who have indicated a move to Chicago. Banks, utilities and phone companies also can benefit from inclusion in a pre-mover packet.

Century 21 is involved in the pre-mover program while Coldwell Banker has a concierge service that provides new homeowners an address book with information on local services at the time of a house closing. Fellow franchisee ERA conducts solo mail programs to homeowners through Getko.

“It's a natural for Cendant's real estate and mortgage brands,” Zychick said.

Related Posts