Travelport’s Plans to Go Private Held Up by Russian Regulators

Travelport is set to go private shortly, but the timing has been delayed by regulators.

On March 15, shareholders of the company approved a takeover by financial firms Siris and Evergreen Coast Capital, a unit of hedge fund Elliott Management. However, the deal still faces regulatory approval, including an OK by authorities in the Russia Federation, where the Langley, UK-based company does some business.

In a regulatory filing on Friday, the company said that “the process of obtaining Russian approval has had the effect of delaying completion of the merger, and such approval may not be received, and conditions thereto may not be satisfied for an extended period of time.” The company had signaled the holdup earlier.

On Friday, the company reported its earnings for what will still probably be the last time for a while. The results came with a modestly downbeat note.

In the first three months to March 31, Travelport’s net revenue saw a 3 percent year-over-year decline to $656.5 million. Its net income of $22.3 million represented a 62 percent decline, year-over-year.

A look at the company’s financials, quietly disclosed Friday, showed that the primary weakness was in distributing air content to travel agencies, a segment that fell 4 percent year-over-year to $452 million. The company’s distribution of non-hotel content and its other digital services reported stable performance.

In the absence of commentary from the executive suite, analysts will be left to chalk up some of the weakness to the company’s loss of travel agency Flight Centre as a customer in 2018. In a smaller blow last year, Tripsta, one of its partner online travel agencies in Greece, went bankrupt.

Investors tend to focus on additional financial metrics. On some of these, Travelport had a brighter story to tell. For example, the company’s free cash flow, or cash after operating expenses, rose 6 percent to $49.3 million in the quarter.

In other words, the company isn’t pressed for cash, despite expenditures on a data center and hybrid cloud capabilities and the costs of on-boarding the first five airlines onto its more merchandising-friendly way of displaying fares to agents and travelers, which is in line with the industry technical standards called the New Distribution Capability, or NDC.

Travelport had somewhat weak performance in the first quarter compared to its peer travel technology companies.

During the same first quarter, Sabre, Travelport’s larger, U.S.-based rival, reported that its revenue grew at a faster rate of 6.2 percent, to $1.04 billion, though Sabre’s net income declined by 35.3 percent to $56.8 million. Travelport’s other larger rival, Amadeus, saw revenue growth of 14 percent for the period, with positive net income growth.

However, comparisons are imperfect. Travelport is much more concentrated on the distribution business than the other two peers, which have diversified into various information technology services to airlines, airports, hotel companies, and other suppliers.

Travelport’s net revenue decline is a headwind. However, it’s important to note that the company has made strides in the adoption of next-generation sales practices for airline content, potentially setting itself up for a return to growth.