Sabre is frustrated that the U.S. Department of Justice has held up its acquisition of Farelogix. Nine months ago it had proposed buying the airline distribution technology specialist.
So on Wednesday the travel technology giant said it would go ahead with the $360 million acquisition on August 21.
“Over the past nine months, we believe we have done all we can to address the DOJ’s concerns,” said Sean Menke, president and CEO of Southlake, Texas-based Sabre, in a statement.
Sabre and Farelogix said they extended the termination date of their acquisition agreement to April 30, 2020 in case the Justice Department chooses to sue. If Justice pursues a complaint on antitrust grounds, Sabre could face significant court costs and a protracted battle.
“While we hope the DOJ will ultimately recognize that this transaction is pro-competitive, we are prepared to vigorously defend the deal in court if necessary,” Menke said.
The Justice Department declined to comment.
It’s unusual for a company to go ahead with a deal while the Justice Department is reviewing it.
Why move ahead with the acquisition? One speculation would be that Sabre executives worry that the Justice Department won’t act otherwise. They may fear the attorneys will be too tied up with other priorities between now and late next year.
“Sabre and Farelogix do not believe that litigation is appropriate in this matter,” a company statement said about the Farelogix deal. Sabre described the federal agency’s review of the acquisition as “lengthy and exhaustive.”
Sabre aims to force Justice’s hand.
Government officials haven’t said in public why they flagged the transaction for a closer look.
Some observers speculated that representatives of at least one major U.S. airline had lobbied for a review.
Sabre continues to defend itself in antitrust litigation with American Airlines Group related to its contract with the group’s since-absorbed U.S. Airways. It’s also battling Lufthansa in court.
Both American Airlines and Lufthansa have been large customers of Farelogix’s products. The carriers have tapped some of Farelogix’s tech to supplement their direct connection systems. Their goal was to reduce some of the involvement of Sabre in their retailing and distribution of fares.
Menke recently wrote a letter to its airline customers promising to continue to offer Farelogix products at the same prices available today or lower and to support and invest in those products at the same level or higher.
He also promised to offer to extend any existing Sabre distribution or Farelogix Open Connect contract on the same terms, including price, for at least three years.
In April, an airline lobby accused Sabre and its peer tech distribution companies, Amadeus and Travelport, of anti-competitive behavior. The International Air Transport Association alleged anticompetitive conduct in written testimony to the U.S. Department of Transportation committee.
One alleged example was that the tech players “impede the ability of airlines and agents to partner with new entrant IT providers.” Another was the tech companies “impose restrictions on airlines’ ability to work with third party technology providers or make the costs of doing so prohibitively high.” Another allegatino was imposing “restrictions on travel agents’ ability to use third party technology solutions.”
The distribution players have repeatedly rejected these claims in various forums. They have pointed to claimed reductions in the average cost for airlines of using their distribution services in the U.S. over the past 15 years. They’ve also pointed to an airline IT market that they say has many tech vendors and in-house airline solutions, among other defenses.
As of early morning trading on Wednesday, investors had a muted reaction. Sabre’s shares were down slightly, in line with a broader market slide presumably tied to broader market news.