Cendant’s Bid for Galileo Is Stalled by Regulators
Cendant Corp.’s $2.9-billion bid for travel reservation firm Galileo International Inc. encountered trouble Wednesday when antitrust regulators in the United States and Europe said the proposed merger is under investigation.
The U.S. Justice Department is scrutinizing “the competitive effects of the transaction,” said department spokeswoman Gina Talamona.
European regulators said the application for antitrust clearance is incomplete because Cendant failed to provide sufficient information regarding the car rental sector in Europe, according to Michael Tscherny, spokesman for European Union Competition Commissioner Mario Monti.
Responding to the regulatory concerns, Cendant Chief Executive Henry Silverman said he still expects the merger to be completed during the third quarter.
“We are confident we can respond promptly to any European Commission inquiries,” Silverman said. “Furthermore, we expect that any investigation by the Justice Department will have no impact on the timing of the Galileo transaction.”
The deal between Cendant, owner of Days Inn and Super 8 hotels and Avis rental cars, and Galileo, which books nearly a third of the world’s travel reservations, is viewed favorably by investors.
News of regulatory worries sent both companies’ shares down Wednesday. Cendant stock fell 62 cents to $19.73 and Galileo dropped $1.48 to $31.76. Both companies trade on the New York Stock Exchange.
Questions have been raised by rivals such as Marriott International Inc. about whether Cendant could use its control of Galileo, an electronic reservation system used by travel agents, to favor its own brands.
Cendant executives have insisted they have no intention of introducing bias into Galileo’s systems or to use Galileo to take advantage of access to competitors’ sales data and other proprietary information.
Airlines are closely monitored by the U.S. Department of Transportation to ensure that no carriers are featured more prominently on the reservation systems, but such oversight doesn’t extend to hotel and car rental companies.
