$125 Million Paid for Credentials Services
Credentials Services International Inc., a direct marketer of consumer credit monitoring programs, said Monday it has been acquired by service industry giant Cendant Corp. for $125 million cash.
The deal, which takes effect immediately, is worth $10 per share to privately owned Credentials’ shareholders--about 28% less than the company had hoped to raise last year in a public offering that never got off the ground.
It is unclear how the deal will affect the 70 management and operations employees at Credentials’ headquarters in Orange.
“Any changes will happen over the next few months” as Cendant evaluates overlapping management and administrative functions, said David Thompson, Credentials’ president and chief executive.
If past performance is an indicator, though, those jobs are gone.
Cendant’s predecessor, HFS Inc., purchased Century 21 and Coldwell Banker residential real estate franchise operations several years ago and quickly relocated their headquarters from Orange County to New Jersey. Cendant, formed recently in the merger of HFS and CUC International Inc., maintains dual headquarters in Parsippany, N.J., and Stamford, Conn.
Credentials, spun off from the former TRW Information Services in 1994, has a total of 200 employees, most working at a telemarketing and customer service division in Texas.
Cendant, with 35,000 employees worldwide, said it wanted Credentials for strategic reasons. The acquisition eliminates a competitor in the credit monitoring business and adds 1.6 million Credentials customers to Cendant’s 2.7 million-member “PrivacyGuard” credit monitoring service--a 60% increase.
Customers of the monitoring services receive annual copies of their files from credit reporting companies like Experian, Equifax and Trans Union, and are alerted when negative information is added to their files and when merchants, banks or others request access to their files.
Cendant is a worldwide provider of consumer and business services. The company’s travel services division markets hotels and rental car agency franchises. Its real estate services unit sells franchises of several major residential chains and operates a corporate relocation service. Its membership service division operates PrivacyGuard and a variety of travel, shopping, automotive and dining club programs with more than 66 million members.
The publicly traded company reported $5.3 billion in revenue and a $55.4 million profit last year. Its stock lost 50 cents a share Monday, closing at $36.50 in New York Stock Exchange trading.
Credentials had tried to go public last year, but the offering was delayed and then canceled when the Nasdaq market weakened at the end of the year, Thompson said.
“We were advised to try again in April or May, and we were getting ready to do that when Cendant approached us with this all-cash offer,” he said.
In its offering prospectus, Credentials reported a profit of $1.2 million last year following a 1996 loss of $22.4 million. Last year’s revenue was $38 million, up from $24.5 million.
In addition to Credentials’ top management, which owned about 9% of the company, beneficiaries of the sale are New York investment firm Canterbury Mezzanine Capital LP, which held an 11% stake, and venture capital firm Lincolnshire Equity Fund Inc. in New York, which owned 80%.
