Cendant announced plans to separate into four independent and publicly traded, pure-play companies was approved by the Board of Directors – one each for Cendant's real estate, travel distribution, hospitality and vehicle rental businesses.  The plan is designed to enable shareholders and the four companies to realize Cendant's value, which has not yet been fully recognized by the market, despite the strong operating and financial performance of Cendant's businesses. 

Following the proposed transaction, Cendant's shareholders will own 100% of the equity in all four companies.  The transaction is expected to be effected through three 100% spin-offs in the summer of 2006.  It is expected to be tax-free for the Company and its shareholders.

Move Designed to Unlock Value

Cendant's Chairman and Chief Executive Officer, Henry R. Silverman, said, "We believe that this is the right thing to do, for the right reasons and at the right time.  Creating four strong and focused pure-play companies is the best way to unlock the full value of Cendant's businesses for the benefit of our shareholders in both the short and long term.  All of our businesses have done well, yet despite Cendant's consistently strong operating and financial performance in recent years, the market has not fully recognized the value of the Company.  Our successful efforts to simplify Cendant's structure and divest non-core businesses have underscored the benefits of greater clarity and focus.  With these efforts complete, we have now concluded that it is in the best interests of our shareholders to establish pure-play enterprises, as we and our advisors believe the sum of the parts has a value in excess of our current share price."

Cendant anticipates that the separation of the Company's core businesses will facilitate a clearer understanding and fairer market valuation of each of these businesses.  The transaction is intended to reduce the complexity surrounding investor understanding and analysis of Cendant's businesses and enable investors to choose how to diversify their Cendant holdings.  Cendant also expects to attract new interest from investors who want to own stock in one or more of the separate companies, even though they might not have been as interested in Cendant's diversified holdings as a single company.

Cendant's President and Chief Financial Officer, Ronald L. Nelson, added, "Since mid-2004, we have created three focused public companies – Jackson Hewitt, PHH Corporation and Wright Express – through two initial public offerings and one spin-off.  The share price appreciation of each of these companies has significantly outperformed its respective industry groupings, the S&P 500 and Cendant, giving greater credence to our view that the aggregate valuations of the four proposed new companies will exceed that of Cendant today."

Strategic Rationale

The Company and its advisors evaluated a number of strategic alternatives to increase shareholder value, including a leveraged recapitalization; a sale of one, several or all of Cendant's business units; and different configurations of a separation. 

"We concluded that this proposed transaction is the most feasible and the most financially attractive," Mr. Silverman continued.  "It is a tax-efficient approach and does not preclude the other alternatives considered by our Board after the separation occurs.  This structure removes another layer of complexity, enables the companies to have readily identifiable market comparables and preserves most of the revenue synergies among our business units.  And we will seek to preserve other synergies through arms'-length contractual arrangements."

Geopolitical Risk

In considering this transaction, the Company also reassessed its previously articulated view that it manages event-related risk through size and diversity.  Commenting on this reassessment, Mr. Nelson said, "Obviously, we thought long and hard about the fact that there will be more volatility in the separate travel assets than currently exists.  However, each new company will be affected differently and we expect that each will be sufficiently capitalized to manage event-driven risk.  Moreover, it has become clear in the last few years that the advantages of focused pure-play companies in the market outweigh the incremental benefits offered by Cendant's hedged portfolio."

Four Strong Competitors

"From inception," Mr. Silverman said, "each of the new companies will be a major competitor in its sector.  Each will have leading brands and market positions, strong balance sheets, significant scale and world-class, experienced management teams."

Mr. Silverman emphasized these key strengths of the new companies:

• Real Estate Services is the leader in the residential real estate services sector – the largest real estate brokerage franchisor and operator, the world's premier employee relocation and mobility services company, and a leading provider of title agency and other settlement services.
• Travel Network encompasses Cendant's Travel Distribution Services division as well as RCI and Vacation Rental Group – with a powerful portfolio of global brands and a strong U.S. and international presence, it is a leader in the growing travel intermediary sector, and is the largest timeshare exchange company as well as the largest marketer of European vacation rentals.
• Hospitality is one of the world's largest lodging companies, with nine of the best-known brands, and the world's largest developer, marketer and manager of timeshares.
• Vehicle Rental Services, with two of the most-recognized brands in its sector, is one of the largest general-use car rental businesses in the U.S.  

Experienced Managements

The four new companies will be led by teams drawn from Cendant's current senior leadership.  Richard A. Smith will be Chief Executive Officer of Real Estate Services, with Mr. Silverman serving as Non-Executive Chairman.  At Travel Network, Mr. Silverman will serve as Chairman and Chief Executive Officer, with Samuel L. Katz as Vice Chairman and President.  Hospitality will be headed by Stephen P. Holmes as Chairman and Chief Executive Officer, while Mr. Nelson will lead Vehicle Rental Services as its Chairman and Chief Executive Officer.

"Cendant is fortunate to have these four world-class executives – Ron Nelson, Richard Smith, Steve Holmes and Sam Katz – to provide the new companies with the leadership they need," Mr. Silverman commented.  "The best way for me to make a contribution is to help Richard and Sam launch these exciting new enterprises."

Highest Governance Standards

Each of the new companies' Board of Directors will be composed of a diverse group of experienced directors, with a majority of independent directors and a commitment to the highest standards of corporate governance. 

No Change in Operations; New Opportunities for Employees

The Company emphasized that the planned transaction should not affect the operations of its business units and that generally customers, suppliers, franchisees and other business partners should see no changes in their relationships with Cendant businesses.  It also emphasized that employees generally should not be affected. 

Mr. Nelson said, "The creation of four separate, pure-play companies will offer Cendant employees important new opportunities for growth.  Most business unit and division employees won't see any significant changes in their day-to-day responsibilities.  And many corporate employees will have new opportunities available to them in the four new companies.  One of our highest priorities will be to ensure that as many employees as possible are placed in appropriate positions at the new companies."

Strong Capitalization, Restructured Debt

It is expected that the new companies will be prudently and conservatively capitalized, which is expected to offset any potential exposure to added market volatility they may face as focused businesses, while at the same time providing flexibility for long-term growth. 

Any refinancing of Cendant's corporate debt will be apportioned between Real Estate Services and Travel Network.  Real Estate Services and Travel Network will share responsibility for the Company's contingent liabilities.  It is expected that Hospitality and Vehicle Rental Services will have no legacy corporate debt but will assume the existing securitized debt related to timeshare and rental vehicle assets, respectively.

Dividend and Share Repurchase Strategy 

The Company noted that it expects to continue to recommend to its Board of Directors payment of the regular $0.11 quarterly dividend until the separation is completed.  Following the separation, it is currently expected that all four companies will pay dividends, which, in the aggregate, will approximate the dividend currently paid by Cendant.  Individual company payments will be determined at a later date and will be within the discretion of the respective Boards of Directors, although Cendant anticipates that the Real Estate Services and Travel Network entities will pay the substantial majority of the post-separation aggregate dividend.

The Company also said that, in light of the proposed transaction, it will re-assess its share repurchase targets as it refines the capital structure and credit ratings of each of the four new companies.  Accordingly, while the Company's share repurchase authorization remains in place, its previously announced share repurchase target of $2 billion over the course of 2005 and 2006 is no longer operative.

Company Headquarters and Names 

The Real Estate, Hospitality and Vehicle Rental companies are expected to continue to be based in Parsippany, N.J., where they are now located.  Travel Network will headquarter at Cendant's current New York City office.  No change in the location of the Company's workforce is anticipated.

No new names have been selected yet for the new companies.  That process will be completed prior to the completion of the separation.  The Cendant name will be retired.

Stock exchange listings for the four new publicly traded companies have not yet been determined.

Cendant is being advised by Evercore Partners and JPMorgan in connection with this transaction, and its outside legal counsel is Skadden, Arps, Slate, Meagher & Flom LLP.

Conditions Precedent to Completion of Transaction

Consummation of the proposed transaction will be subject to certain conditions precedent, including final approval by Cendant's Board of Directors, receipt of a tax opinion of counsel and the filing and effectiveness of registration statements with the Securities and Exchange Commission.  Also, the separation is subject to the completion of applicable refinancings.

Approval of Cendant's shareholders is not required.