Hogg Robinson Group has gone through a significant amount of restructuring in recent years. The board obviously thinks now is the right time to cash in.
The takeover of the travel management company would not include software business Fraedom, which Visa would buy for $198 million (£141.8 million) in a separate transaction.
American Express GBT has offered between $1.54 (£1.10) and $1.68 (£1.20) per share. The final price depends on the Fraedom sale.
Hogg Robinson’s two significant minority shareholders, Emirates-owned Dnata and investment firm Boron, which collectively own 45.62 percent of the company, have agreed to vote in favor of the takeover. Travel industry veteran John Fentener van Vlissingen, who founded BCD Travel, controls Boron.
Should 75 percent of shareholders approve the offer, then the deal would close in the second quarter.
Hogg Robinson has gone through a significant period of restructuring and now that this is complete it is clearly more attractive to other companies.
The company was not up for sale but the offer from American Express GBT “places value on the company’s prospects and provides certainty, in cash, to Hogg Robinson shareholders today, as against the inherent uncertainty of the delivery of future value that exists in any business”.
According to the stock market announcement, the combined group will be “a global market leader in business travel management”.
When companies pursue mergers and acquisitions they love to talk about potential “synergies”, often involving job losses. In this case the combined group would cut between 6 and 8 percent of the workforce. Hogg Robinson employs around 4,500 people while American Express GBT has 12,000. Up to 1,320 would therefore lose their lobs.
“Given the similar customer focus of the two businesses, GBT expects synergy potential to be substantial. GBT and GBT Holdings therefore recognise that, in order to achieve the expected benefits of the acquisition, operational and administrative restructuring will be required…” the stock market announcement said.
What the Companies Said
Greg O’Hara, chairman of the board of American Express GBT, said: “The board of directors of GBT strongly endorses the acquisition of Hogg Robinson. Significant customer, operational and financial benefits are expected.
According to Travel Weekly’s 2017 Power List of the largest travel agencies, American Express Global Business Travel, which was third largest on the list, did $31.1 billion in 2016 sales while HRG North America, which is part of the larger Hogg Robinson Group and ranked sixth, notched $16 billion in sales. Each had 12,000 employees.
Expedia, including its Egencia unit and its leisure travel businesses, topped the Power List and recorded $72.4 billion in sales in 2016. It employed 20,000 full- and part-time employees.
The combined American Express Global Business Travel and Hogg Robinson Group would create a powerhouse in corporate travel, and would be at least twice the size of its next largest rival, BCD Travel.
“This will enable the combined group to focus on additional value creation for customers and the marketplace, while generating new efficiency and growth opportunities for the business. I am excited at the prospect of creating a truly world class travel management company using the best available talent from both Hogg Robinson and GBT.
“Customers and travelers will benefit from the combined group’s complementary geographical footprint and technology offering. This combination will unlock meaningful value for all stakeholders.”
Nigel Northridge, chairman of the board of Hogg Robinson Group, said: “I am reassured by GBT’s commitment to work closely with Hogg Robinson to ensure we use the best available talent from both organisations to create a truly world class travel management company. The transaction will deliver significant benefits to all stakeholders.”
Photo credit: Passengers look out to an airfield at Heathrow Airport in London. American Express Global Business Travel plans to buy Hogg Robinson Group. Heathrow Airport