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Cendant to snap up Orbitz for $1.25 billion

The deal will transform the travel and real-estate heavyweight into the second-largest online travel company.

Cendant, a travel and real-estate company, announced on Wednesday that it will acquire online travel site Orbitz in a $1.25 billion deal.

Cendant plans to pay $27.50 a share in cash to acquire Orbitz, which is a formidable competitor among the online travel sites. Under the agreement, Cendant will continue to offer both Orbitz and its CheapTickets brand in the consumer travel market.

The acquisition will transform Cendant into the second-largest online travel company. Other competitors include industry leader Expedia, Travelocity.com and other discount sites such as Priceline.com.

"The addition of Orbitz and its outstanding management team to our portfolio of travel distribution businesses immediately places Cendant in a leading competitive position in the domestic online travel distribution business," Samuel Katz, chief executive of Cendant, said in a statement.

Competition is increasing in the travel industry, as carriers such as Northwest Airlines offer cheaper fares to encourage travelers to book flights directly through their Web sites; going through a travel agent results in higher costs for the carriers.

Orbitz, which was founded in 2000 by American Airlines, United Airlines, Northwest Airlines, Continental Airlines and Delta Air Lines, is also facing increasing rivalry from upstarts such as SideStep and Mobissimo.

Yahoo, meanwhile, announced this month that it plans to test FareChase, a new search engine that allows customers to compare prices on travel. Travelers would be able to compare fares among carriers such as JetBlue and Delta, for example.

For the business sector, Cendant expects to combine its CheapTickets and Travelport technology and operations, operating them as Travelport. Orbitz will also continue to offer corporate travel.

The deal is expected to be completed in November.

Cendant's travel division includes wholly owned subsidiaries Avis Rent A Car System, Days Inn and Galileo International, a travel reservation system.