Cendant to Buy Galileo

Cendant Corp. agreed Sunday to acquire reservation systems supplier Galileo International Inc. for nearly $2.9 billion, sources said.

The acquisition is expected to significantly strengthen Cendant’s ability to generate new revenue in several existing travel service units. The acquisitive New York company owns the franchising rights for such brands as the Avis rental car agency, hotel chains Days Inn and Ramada and time-share resort operator Fairfield Communities.

The deal also positions the company in direct competition with Fort Worth-based Sabre Holdings Corp., the world’s No. 1 computerized travel reservation firm.

Terms of the cash-and-stock transaction call for Galileo shareholders to receive the equivalent of $33 per share. Cendant will swap 80.5% of Galileo’s outstanding shares for its own stock and exchange cash for the remaining 19.5% stake, sources familiar with the situation said.

Boards of both companies approved the transaction over the weekend and an announcement is expected today, the sources said. A Galileo spokesperson declined to comment. Cendant could not be reached for comment.

Galileo, based in Rosemont, Ill., ranks as the world’s No. 2 computerized travel reservation network. But while it has made significant strides in developing its overseas capabilities, it has lost ground in the domestic market.

The deal represents an 11% premium over Galileo’s closing price of $29.80 Friday on the New York Stock Exchange, and a more than 100% premium above the company’s trading price last October, when it first announced it intended to explore a possible sale or buyout.

Cendant shares on Friday closed at $18.45 on the NYSE.