Cendant, the Parsippany, NJ, direct marketer of memberships, has settled a $350 million class action lawsuit brought by investors after the company's stock plummeted from $41 to $19 per share due to accounting problems last April. The suit alleged that the company misled investors by failing to report the accounting problems.
Cendant has agreed to increase the market value of PRIDES, convertible securities that were issued to finance the acquisition of American Bankers Insurance, Miami, by $350 million for shareholders of record April 15,1998.
The settlement, if approved in court, will cause Cendant to take an after-tax charge of $220 million, or $0.26 per share, for the fourth quarter of 1998. It is not expected to affect 1999 earnings. The accounting problems have forced the company to cancel its acquisition of ABI.