Cendant Sees Value in Pieces

Updated from 6:37 a.m. EDT

With its breakup announcement Monday, Cendant (CD Quote) acknowledged that the key to unlocking its value most likely lies in splitting itself into easier-to-understand businesses.

However, investors, who will receive stock in each of four new mini-Cendants next summer, revalued the company lower after it preannounced weak third-quarter results and a slowdown in its consumer travel businesses. Cendant, whose shares have traded mostly between $10 and $25 for the past five years, was down $1.45, or 7.2%, at $18.64.

Cendant executives and some Wall Street analysts have said for some time the stock doesn't reflect the full value of the company's myriad businesses.

Many investors no longer have an appetite for the headache-inducing task of assessing the value of complex conglomerates. That reality already prompted IAC/Interactive (IACI Quote) chieftain and serial dealmaker Barry Diller to spin off his online travel businesses as Expedia (EXPE Quote) in August, only two years after IAC took full control of them in deals aimed at creating a sprawling Internet amalgamation.

With Expedia shares falling about 18% since August, the spinoff so far appears to have failed to unlock previously hidden value.

New York-based Cendant said its breakup, to be accomplished by three spinoffs next summer, will separate it into independent businesses focusing on real estate, travel services, hotels and car rentals.

The company said the market's valuation doesn't reflect its businesses' strong operating and financial performance, but Cendant delivered a weak third-quarter report card Monday and an ominous forecast about its consumer travel businesses. The company said earnings will be 44 cents a share, at the low end of guidance and below the 46-cent consensus from Thomson First Call.

Citing weakness in the travel business, it also lowered its year-over-year growth forecast for fourth-quarter earnings before interest, taxes, depreciation and amortization, or EBITDA, to 14% from about 25%. The company plans to release complete results after the closing bell Monday.