Cendant To Acquire Galileo For $3 BillionCendant To Acquire Galileo For $3 Billion

Cendant Corp., parent company of Howard Johnson, is about to become the owner of a major travel distribution system--the first not owned by an airline. Sabre Holdings Corp. will then face its most serious competitive threat.

Cendant, which also owns the Days Inn, Avis Rent A Car, and Century 21 real-estate franchises, as well as technology company Wizcom International, said Monday that it has agreed to acquire Galileo in a $3 billion deal that is expected to close by fall. Originally launched by United Air Lines Inc., Galileo is now publicly traded, but United still holds 18% of its stock.

The news is even more interesting given the industry rumors that Cendant also is in talks with Worldspan LP, the smallest and most aggressive of the four existing travel distribution systems. Sabre booked 423 million air segments in 2000, according to "Business Travel News," while Galileo handled 316 million, and Worldspan ticketed 156 million. (The fourth system, not currently in play, is Amadeus. Air France, Iberia, and Lufthansa each hold large shares in Europe's market leader, which booked 277 million segments last year.)

Originally launched as closed networks designed to give travel agents access to airline inventory, the four systems have found a new market in selling directly to consumers through Internet sites and corporate travel buyers through business-to-business booking systems. Galileo hesitated to jump into the online market, but Worldspan handles reservations for three of the biggest online travel sites: Microsoft's Expedia.com, Priceline.com, and Orbitz.com, the new multiairline site. Sabre's own site, Travelocity.com, still ranks first in the online market.

Cendant plans to use Galileo's system in its own travel agency and its travel portal affiliate, the company says. Cendant will be replacing Galileo CEO James E. Barlett.

Galileo stockholders will receive a combination of Cendant common stock and cash with an expected value of $33 per Galileo share.