THE mastermind behind Cendant’s aggressive expansion of its Travel Distribution Business, Sam Katz, has fallen on his sword after a review of the eBookers business – which he bought for US$350 million in February – revealed huge losses.
In a convoluted release, Cendant Chairman Henry Silverman said TDS business would be hit with a $US200 million to US$300 million “impairment charge due largely to reduced return expectations at ebookers” in the 2005 accounts.
Which begs the question – how much did ebookers actually lose and why did Cendant pay so much for it?
It also throws the spotlight on other big Katz buys – such as Orbitz for US$1.2 billion – plus the acquisition by American rival, Travelocity, of another European loss-maker, Lastminute.com, for US$1 billion.
The US giants have been on a buying spree as they chase growth outside the slowing North American market. However, it is now clear that some valuations are questionable, at best.
But Katz, who has been with Cendant for 10 years and in charge of TDS since 2001, won’t be around to provide insight, slipping out the back door with no official comment.
Chairman Silverman spun the announcement hard, looking forward not back, hyping the 2006 forecast rather than dwelling on 2005.
“TDS has clearly fallen short of its 2005 targets due principally to our international online business, particularly ebookers,” Silverman said.
“We face company-specific issues that we have identified and are addressing, not with quick fixes but with significant new investments, including the development of a single, global online platform.
“While with hindsight our past projections were too high, the fact is TDS is a strong business that we expect will achieve approximately 11% EBITDA growth next year.”
Cendant has now delayed the planned stock exchange spin-off of its TDS business until at least October while it hunts for a new leader and attempts to put its house in order before going public as a so-called “pure play”.
Ebookers operates 14 sites across Europe. It is an amalgam of numerous smaller companies operating across different channels and platforms that was cobbled together in the years before Cendant took an interest.
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