Skift Take

By the end of this week, Travelport is expected to leave the public markets in a $4.4 billion leveraged buyout. After months of waiting, the company can finally move on to its next steps.

Travelport Worldwide will go private in a $4.4 billion deal expected to be finalized on or about Thursday, May 30, pending approvals, according to Standard and Poor’s, which will drop Travelport from its indexes after markets close at the end of this week.

A Travelport spokesperson had no comment. The company said earlier this month that the deal would be completed by July 1 by a consortium of buyout firm Siris Capital and an arm of hedge fund Elliott Management.

Russian antitrust officials were expected to approve Siris Capital’s acquisition of Travelport shortly, news service DealReporter reported Tuesday. Russian officials had been delaying an OK of the deal.

Travelport announced the leveraged buyout in December 2018. Elliott had agitated for a deal since March 2018, when the New York-based activist hedge fund revealed it had taken a 12 percent stake in the Langley, UK-based e-commerce platform for the travel sector.

Travelport’s Future

In the past year, Travelport’s overall financial performance has softened.

On May 19, research analysts at Morgan Stanley lowered their forecast for Travelport’s 2019 revenues by 5 percent, to $2.61 billion. The tech company recently lost significant customers, such as Flight Centre in Australia and New Zealand, and more recently some call center work for CWT (formerly Carlson Wagonlit Travel).

The company has won new business to offset some of the customer losses in 2017 and 2018, such as a joint venture uniting Travelport Japan KK and a tech subsidiary of the airline JAL called Axess.

However, research service Moody’s expects a slight decline in Travelport’s distribution revenues in the next year.

What should Travelport do as a private company? “Moving forward they will continue to be at some disadvantage to their larger peers that in addition to offering a core global distribution system platform at scale also offer information technology solutions to airlines, hotel groups, and other suppliers,” said Dan Wasiolek, a senior equity analyst for Morningstar.

“While private they should maintain their higher leverage relative to peers to allow them to continue investment behind their platform to maintain share,” said Wasiolek.

In October, the travel distribution company became the first of its peers to process a transaction according to New Distribution Capability (NDC) technical standards that airlines have advocated in recent years. In February, it said it had completed the integration of the first group of travel companies that will now have access to NDC content.

Building on that, Travelport is redoubling its focus in the U.S. and the Americas, where it is anticipating market share gains.

Travelport had intended to start delivering a mix of new and traditional types of content via its reservation system for agents, called Smartpoint.

The tech giant has seen in recent years a gradual decline in its market share of air travel distribution in its ranking as the smallest of the three leading operators, which includes Amadeus and Sabre.

eNett Opportunity

The new owners have been coy in public about their plans for Travelport. However, a look at financial disclosures showed that they have repeatedly proposed the sale of eNett, a financial technology unit that is majority owned by Travelport.

Financial technology is a hot space right now.

In March, Mastercard bought for an undisclosed sum, Transfast, which offers global cross-border account-to-account money transfer and lets customers connect, track, and settle transactions with almost every bank around the world via its network.

Visa paid about $320 million for Earthport, a company similar to Transfast, in a deal that received regulatory approval in May.

A proposed multi-billion acquisition by Fidelity National Information Services of major business-to-business payments service Worldpay is expected to close by September.

“Their control of payment system eNett is an advantage to their GDS offering, so my advice would be to hesitate to sell that business and risk thereby weakening their competitive position,” said Wasiolek.

Overall Travelport has a diversified customer base with high retention rates and a balanced geographical footprint. It also has a track record of cross-selling airline merchandising solutions, hotel bookings, and other services alongside its core air travel products. The overall travel market exhibits steady growth driven by the long-term increase in demand for travel, partially offset by a slow trend of disintermediation toward consumers booking directly with airlines.

Shares of Travelport ended trading on Tuesday at $15.58, giving it a market value of $1.98 billion. The buyout deal values Travelport at $15.75 a share, below the preliminary offer it made of between $17.50 and $18.50 per share in April 2018, as Skift reported. Travelport has between $2.3 billion and $2.9 billion in debt, depending on how you measure.

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Tags: eNett, global distribution systems, travelport

Photo credit: Travelport CEO Gordon Wilson spoke at Skift Tech Forum in June 2018. The company is set to go private in a deal pending regulatory approval. Skift

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