The Timeshare Beat
April 2, 2002
HONOLULU, HI -- As predicted by The Timeshare Beat several weeks ago, Cendant Corp. (NYSE: CD) is continuing its
agressive program to extend its timeshare presence by purchasing Trendwest Resorts Inc. (NASDAQ: TWRI) in a deal
worth about $894 million in stock and assumed debt.
The announcement was made yesterday via a joint press release, followed by conference calls from both companies
to explain matters to their shareholders. According to company statements, Cendant will acquire all of the outstanding
common stock of Trendwest through a tax-free exchange of Cendant common stock. Cendant also entered into a definitive
stock purchase agreement to acquire approximately 90% of the outstanding shares of Trendwest from JELD-WEN and
certain stockholders. JELD-WEN owns approximately 81% of Trendwest. Cendant will issue approximately 48.3 million
shares and assume approximately $74 million of Trendwest net debt, which will be repaid. Jeld-Wen owns about 81%
of Trendwest.
Under the terms of the agreements Trendwest stockholders will receive between 1.297 and 1.486 shares of Cendant
common stock per Trendwest share through a tax-free exchange of Cendant common stock. The number of Cendant shares
to be issued will fluctuate from 1.486 Cendant shares per Trendwest share if the average price per Cendant share
is equal to or less than $16.15 during the measurement period to 1.297 Cendant shares per Trendwest share if the
average price per Cendant share is equal to or greater than $18.50 during the measurement period. Therefore, the
total number of Cendant shares to be issued will be between 55.4 million and 48.3 million. If the average price
per Cendant share during the measurement period is below or above the collar, the value of the transaction will
be less or greater than $24.00 per common share of Trendwest.
Trendwest went public in August 1997, selling almost 2.9 million shares at $18 apiece in a $51.7 million initial public offering. Despite a troubled travel industry since Sept. 11, the company has continued to do well in sales as well as with its stock, with shares reaching a 52-week high of $28.66 in mid-December and closing prior to the announcement at $24.02. Trendwest reported net income of $13.6 million on revenue of $110.3 million in the fourth quarter, which ended Dec. 31.
The stock purchase will be completed in two stages. Cendant first will buy 90 percent of the outstanding shares
from Jeld-Wen and certain other stockholders no later than May 1. The remaining 10 percent of outstanding shares
will be bought after the new Cendant shares are registered for sale with the Securities and Exchange Commission.
The acquisition immediately gives Cendant a huge presence in the timeshare industry on the West Coast of the USA
as well as resorts in Mexico, Hawaii, Canada and the South Pacific. Cendant has also said that they intend to maintain
Trendwest as a separate brand rather than folding it into its Fairfield Brand. Once the deal closes, Cendant will
manage the timeshare operations for about 150,000 owners of the brand's WorldMark, the Club.
Cendant Corp. now owns not only the largest timeshare exchange company in the world, Resort Condominiums International
(RCI), but 3 major timeshare companies: Fairfield Resorts, Equivest Finance (which includes the Peppertree Resorts)
and Trendwest Resorts. Cendant also said it would continue to make acquisitions to expand its timeshare business
offshore. Some estimates now put Cendant's ownership of timeshare inventory at 15% to 19% of the US market.
The companies reported that they have identified about $15 million in achievable annual savings and added revenue.
Long-time industry pros have already begun to speculate that the savings are likely to come largely from the "retirement"
of superfluous Trendwest executives with high salaries, combined with a new pared down commission structure more
in line with the structure at Fairfield Resorts.
Not yet answered is the question of affiliation with an exchange company. Trendwest affiliated its WorldMark the
Club resorts with RCI for many years, but last year changed its affiliation for its new resorts to Interval International,
the second largest exchange company in the world. Industry insiders speculate that Cendant may let the II contract
run its course and then re-affiliate with RCI. Since the majority of WorldMark owners are already enrolled with
RCI, it is also expected that a push will be made to upgrade owners to RCI Points and that a new internal program
will be designed to allow an easy owners-exchange among the properties of the three Cendant-owned timeshare companies.
Fairfield, Trendwest and Equivest all have a separate system of points which must be reconciled for this to happen.
Also not addressed in the companies' statement was how the merger will reflect on Trendwest's separately owned sister resort company Eagle Crest Resorts and how MountainStar Resort, Trendwest's massive real estate development in Washington, fits into the deal.
About Trendwest Resorts
Trendwest got its start in 1989 when diversified window and door makers Jeld-Wen, out of Klamath Falls, Ore., decided to enter the timeshare business. William Peare was quickly hired to head up the effort and has served as the company's CEO ever since. Peare's résumé includes stints as president of Thousand Trails and CEO of All Seasons Resorts, as well as having been an independent resort consultant.
Headquartered in Redmond, WA, Trendwest Resorts has been the developer and marketer of outstanding resorts in sought after destinations, from Whistler, Canada, to Los Cabos, Mexico, and Kona, Hawaii, to Las Vegas, Nevada and even the Fijian Islands. A leader in the vacation ownership industry, Trendwest Resorts builds and remodels luxury vacation condominiums and turns them over, debt free, to WorldMark, The Club. In exchange, WorldMark grants Trendwest Resorts the exclusive right to sell Club ownerships from sales offices located throughout the West.
At December 31, 2001, Trendwest had 45 sales offices, and nearly 149,000 WorldMark and WorldMark South Pacific owners enjoyed 2,789 condominium units at 48 resort locations in the United States, British Columbia, Mexico, Fiji and Australia.
About Cendant Corp.
Cendant is one of the foremost providers of travel, real estate, vehicle, and financial services in the world; the world’s largest hotel franchisor, the world’s largest vacation ownership organization, and the world’s second largest general-use car rental agency; the world’s largest real estate brokerage franchisor, one of the largest retail mortgage originators in the U.S., and the world’s largest corporate employee relocation company; the franchisor of the second-largest tax preparation service in the U.S., the owner of the largest non-municipal car park operator in the U.K., and the world’s leader in reservation transaction processing for the hotel and car rental industries.
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