Realogy Plans Huge Buyback

It cuts guidance again, though.
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The slowing housing market took down Cendant's (CD) real estate spinoff, Realogy (H) - Get Report, Wednesday.

Shares in Realogy fell 5% Wednesday before the company slashed second-half guidance for the second time. Shares rose modestly in postclose action, though.

The late bounceback could be due to the Parsippany, N.J., franchisor's plans to buy back 19% of its slumping stock. The company said it will use a $1.4 billion distribution from Cendant, which Wednesday said it completed the sale of its Travelport business to private equity buyers led by the Blackstone Group.

Realogy said it will buy back 48 million of its 250 million shares using the money from Cendant. It will pay down debt with remaining proceeds.

"This stock repurchase program demonstrates our confidence in the long- term growth of the company and our strong free cash flow," said Realogy's Henry R. Silverman. "We believe our shares are mispriced by the market, and the Board felt that the best investment we can make with the Travelport proceeds is our own stock."

Realogy expects that the share repurchase program will benefit 2007 earnings per share by 7% to 10%. That will come as much-needed relief for investors, who have seen the stock lose more than 20% of its value since it started trading last month.

The move came as Realogy cut guidance for the

second time in a month.

Realogy now expects to post earnings before interest, taxes, depreciation and amortization of $800 million to $900 million for 2006 on revenue of $6.4 billion to $6.7 billion. Net income excluding certain costs is estimated at $345 million to $415 million, or $1.42 to $1.75 per share.

Without giving effect to certain adjustments but reflecting the contemplated share repurchase, GAAP net income for the year is estimated at $250 million to $340 million, or $1.03 to $1.43 per share.

Previously, Realogy projected EBITDA of $925 million to $1.05 billion in 2006, down from $1.1 billion in 2005. The company had earlier forecast a flat year.

At the time, Realogy projected 2006 net income of $380 million to $465 million, down from $497 million last year.

"We have now analyzed our open contracts pipeline, which impacts closed sales volume in August through October, and this data reflects a slower than expected second half," Realogy chief Richard Smith said. "This moderation is further confirmed by the 15% annual decline in national purchase mortgage applications that was reported in July. As a result, we have reduced our estimates for the remainder of 2006."

Cendant said it got $4.3 billion in the sale. Of that, some will be used to pay expenses and pay down debt, and $760 million will go to hotel spinoff



. Next week, Cendant is due to seek holder approval of a 1-for-10 reverse split that will pull its shares out of the low single digits and change its name to Avis.

After giving effect to the proceeds from the sale of Travelport and the completion of the contemplated share repurchase program, Realogy estimates that it will have total corporate debt outstanding of approximately $2 billion.

Shares rose 27 cents late Wednesday to $20.50.