CUC-HFS Merger Deal to Create Strong One-Stop-Shopping Entity

From Associated Press

CUC International Inc., a company that specializes in telephone shopping services, plans to merge with Avis and Days Inn franchiser HFS Inc. in a $10.9-billion deal.

The combination, announced Tuesday, would create a company that could potentially provide one-call access to a range of services, including shopping-club memberships, travel packages and car and time-share rentals.

“I think it’s going to create a company the likes of which the market has never seen,” said Neil Barsky, an analyst for Morgan Stanley & Co.

CUC, founded as Comp-U-Card of America in 1973, basically sells merchandise, travel packages and other services at a discount to consumers who buy memberships. Members typically place orders over the telephone.


HFS is the world’s largest franchiser, charging fees to operators of businesses using its service brands. Through $3.9 billion in acquisitions since 1996, it has been trying to create a network of companies that can be cross-marketed.

“By combining HFS’ brands and our consumer reach of more than 100 million customers annually with CUC’s direct-marketing expertise, powerful club membership delivery system and 68 million memberships worldwide, we will create tremendous new opportunities,” said Henry R. Silverman, chairman and chief executive of HFS.

Barsky said the merger would speed up HFS’ plans to offer one-stop shopping for home buyers, vacationers and business travelers by adding businesses that would have taken HFS years to develop.

HFS’ holdings include Century 21, Coldwell Banker, Howard Johnson, Ramada and Resort Condominiums International. Last month, it completed a $1.7-billion acquisition of PHH Corp., one of the nation’s largest corporate fleet managers.


HFS and CUC already have joined forces in their Transfer Plus program, where CUC’s travel service is marketed to customers of HFS’ hotels.

“With similar business models, both companies have pursued two sides of the same high-growth strategy: helping smaller players, both individuals or businesses, to compete in a global, information-intensive and increasingly competitive economy,” said CUC Chairman and Chief Executive Walter A. Forbes.

A new name for the combined company will be disclosed when the deal is completed, which is expected sometime this fall. The combined company will have revenue of $4.3 billion.

Terms of the merger call for CUC to issue 2.4031 shares of its own stock for each share of HFS. That will require CUC to issue about 434 million shares, worth $10.9 billion as of Friday, the last trading day before the deal was announced.

Shareholders of each company will own about half of the post-merger CUC/HFS. The boards of both companies have approved the deal.

The two companies will maintain their operations in Parsippany, N.J., where HFS is based, and Stamford, Conn., where CUC is headquartered, as well as New York and some other locations. Job cuts are not expected.

Forbes will serve as chairman of the combined company and Silverman president and chief executive until 2000, when they will swap positions.

The deal was announced after the close of trading Tuesday on the New York Stock Exchange. HFS finished up $2 to close at $59 a share; CUC closed at $25, off 12.5 cents.