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Oct. 24 (Bloomberg) -- Cendant Corp. founder Henry Silverman plans to break the travel and leisure company into four parts, seeking to revive a stock that never recovered from an accounting scandal eight years ago. Cendant, owner of the Avis car-rental and Days Inn hotel businesses, cut its earnings forecast.

Cendant's real-estate, travel-distribution, hospitality and vehicle-rental units will become separate publicly traded companies, according to a statement issued today. New York-based Cendant, owner of the Avis car-rental and Days Inn hotel businesses, will drop its name and Silverman will become chief executive of the travel company, ceasing control of the rest of the enterprise he built.

Silverman, who created Cendant by buying and selling 93 companies since 1997, said today the split was necessary because ``the market has not fully recognized the value of the company.'' Cendant shares have plummeted by more than a third since it merged with CUC International Inc. in 1997 and was found to have committed one of the largest accounting frauds in U.S. history.

``They needed to do something different,'' said Thomas McIntyre, who helps manage $125 million including 526,000 shares of Cendant at Orleans, Massachusetts-based McIntyre, Freedman & Flynn. ``People don't know what they're buying when they buy Cendant. The company is substantially undervalued.'' He said Cendant's market value may rise to $30 billion based on the $2 billion in free cash flow generated each year.

The stock fell $1.64, or 8.2 percent, to $18.45 at 1:45 p.m. in New York Stock Exchange composite trading. It was the biggest decline in three years. The shares have dropped 9.9 percent this year through Oct. 21, while the Standard & Poor's 500 Index has declined 2.7 percent.

The company considered ways to boost the stock price since last November, Silverman said on a conference call. Other alternatives included selling units, a leveraged recapitalization or splitting the company in a different manner.

Cendant, which reports earnings today, cut its fourth- quarter forecast by four cents a share, blaming weakness in its travel businesses brought on by higher gasoline prices and reduced travel in Europe. Results will also be hurt by costs to combine two timeshare businesses. Cendant said it will earn 23 cents to 26 cents a share.

Third-quarter profit fell 21 percent to 44 cents a share from 56 cents a year earlier, Cendant said today. Analysts in a Thomson survey estimated 46 cents.

The company said it would not give a 2006 profit forecast because of the split. Next year's earnings before interest, taxes, depreciation and amortization will rise as much as 13 percent, with a 10 percent increase in revenue. That compares with a previous forecast of 19 percent for profit and 11 percent for sales.

Silverman, 65, is a former investment banker at Blackstone Group Inc. While there, Silverman became head of the firm's Hospitality Franchise Systems Inc., which owned the Days Inn, Ramada and Howard Johnson hotel brands. Blackstone later spun off the unit.

After leaving Blackstone 1991, Silverman managed the hotel company, then called HFS Inc. It expanded with purchases of residential real estate brokers including Century 21 and Coldwell Banker and tax preparation company Jackson Hewitt Inc. in the 1990s, tapping into the growing number of baby boomers in the U.S.

Cendant shares trade at less than the $39.44 high reached in 1998 after Silverman's HFS merged with marketing firm CUC International. The stock plunged to a low of $18.17 the month Cendant said CUC overstated profit.

Silverman was paid a salary and bonus of $24 million in 2004 and $22.85 million in 2003. His pay has prompted criticism from investors, and in April 2004 the company agreed to shorten his contract by five years and tie his bonus more closely to profit to settle a shareholder lawsuit.

Cendant follows other companies that have pursued higher share value by splitting up this year. Barry Diller's IAC/InterActiveCorp spun off its online travel unit, Expedia Inc., in August. Viacom Inc., the No. 3 U.S. media company, is planning to split into two by the end of the year.

Cendant said the split will occur in 2006 and will be tax- free for the company and shareholders, who will own 100 percent of the new businesses. Investor approval isn't required, the company said.

Cendant said Richard Smith will be chief executive of the real estate services unit and Silverman will lead the travel network, which includes its timeshare business and the Orbitz online travel agency. Stephen Holmes will be chairman and chief executive of the hospitality unit, which is the world's biggest franchiser of hotels. President and Chief Financial Officer Ronald Nelson will lead the car-rental unit. All are current Cendant executives.

Michael Millman, an analyst with independent stock analysis firm Millman Research Associates in Short Hills, New Jersey, said before the announcement that Cendant may be worth $32 a share in a breakup, or 60 percent more than the current stock price.

Cendant sold or spun off businesses including an auto-fleet billing unit and a marketing-services arm in the past year. The program to divest units was completed with the sale of the marketing unit on Oct. 17.

The company at the same time has bolstered the two main units through acquisitions, including the Orbitz online travel agency and the purchase of the Wyndham hotel brand. The company's real-estate unit includes the residential brokerages Century 21, Coldwell Banker, ERA and Sotheby's Realty.

Cendant's gross margin, a yardstick of profitability, has shrunk by 23 percentage points in the last five years to 47.75 percent in 2004, according to Bloomberg data.

Cendant, which hasn't chosen names for the new businesses, said it expects to pay its 11-cent quarterly dividend until the companies are formed. A $2 billion share buyback target through 2006 is ``no longer operative,'' it said in the statement.

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