The End of Orbitz as a Public Company

Excerpt from today's One Page Annotated Wall Street Journal Summary (which you can get emailed to you every morning by signing up here):

Cendant to Sell Travel Unit To Blackstone Affiliate

• Summary: Cendant sold online travel services Orbitz and eBookers and its Galileo global travel distribution system [GDS], which together comprise its Travelport business, to private equity firm Blackstone Group for $4.3 billion. Traveloport has revenue of $2.5 billion and $550 million in EBITDA. Cendant is in the process of spinning out businesses in an attempt to raise its stock price; it sold Travelport instead of spinning it out because it is taking a loss on the sale so there's no taxable gain. Travelport had been hit financially by a charge equivalent to the entire value of eBookers due to integration problems. Morgan Stanley analyst Cris Gutek said Cendant "left several hundred million dollars on the table" because it rushed to sell Travelport, but Travelport CEO Jeff Clarke disputed that.
• Comment on related stocks/ETFs: The suggestion that Cendant is selling off its businesses at too low a price, if true, won't help its stock (CD). Meanwhile, investors in Expedia (EXPE), Travelzoo (TZOO) and the other online travel sites will want to consider whether the purchase of Travelport by a private equity firm will enhance its competitive strength. The answer: probably not, as private equity firms are focused on maximising cash flow through cost cutting. In fact, Cendant's sale of Travelport caps a monumental failure in its foray into online travel. Bundling Internet businesses with an arguably outdated GDS was a mistake, and it failed to invest enough in Orbitz to make it a strong competitor. Perhaps Blackstone will eventually IPO Orbitz and eBookers as an Internet pure play, leading to the reappearance of Orbitz as a public company. Cendant's latest conference call transcript is here.