With this deal, Wex now becomes a powerhouse in assisting business-to-business travel payments worldwide. The deal also gives cash to seller Travelport, which might use the money to expand its airline tech offerings.
Wex, a financial technology company, said Friday it had agreed to buy eNett, a payments tech company for travel suppliers like airlines and online travel agencies, along with a related financial technology company Optal, for about $1.7 billion.
“This deal creates the foremost payments leader in the global travel marketplace,” said Melissa Smith, Wex Chair and CEO, during a press conference. The combination represents about 20 percent of the market, she said. The offer is comprised of about $1.275 billion in cash and the rest in equity.
The biggest gain for Wex is adding eNett’s geographic reach in Europe and Asia-Pacific, she said.
Both eNett and Optal work with major online travel agencies like Booking.com and suppliers like AirAsia, and generated about $155 million in revenue together in 2019.
Travelport, the travel distribution technology company, held a majority, or nearly three-quarters of eNett’s shares. Privately held Optal held the remaining shares.
“This is good news for Travelport, as we tighten our strategic focus and good news for eNett, which gains a new owner that complements its capabilities,” said a Travelport spokesperson by email.
Both Travelport and Optal had been itching to sell eNett but fought with each other over acceptable outcomes as bids have come in over the past year, as financial filings last year revealed. Last June, investors Siris and Elliot Management’s private equity arm took Travelport private.
“Anything above $1 billion for eNett seems like good sell price for Travelport,” said Morningstar analyst Dan Wasiolek. “The initial fallout will weakens its competitive position versus Sabre and Amadeus due to reduced cash flow from fast-growing eNett, but it should free up capital to reinvest, or more likely just locks in return on investment on the Travelport purchase, which was bought at an attractive valuation to begin with.”
Wex Gets Stronger
Wex didn’t have some eNett products had, such as mechanisms to let online travel agencies use their own balance sheet to make payments on their behalf on a near real-time basis.
Wex also gets from this deal eNett’s expertise in handling travel payments designed for the merchant model which is more common than the agency, or pre-pay model, that’s more popular in the U.S. Under the merchant model, suppliers sell inventory to distributors at discounted rates, and then the third-parties mark-up the price — which creates multiple, and often cross-border, payments complexities.
“We expect to see more growth on a global basis to the merchant model, with the biggest shift going to the European market,” said Smith. “About a third of the market worldwide is done on the merchant model and we expect that to grow.”
Wex and its acquired companies help support the use of virtual cards, which now account for around 14 percent of business travel payments. This represents a switch from lodged and corporate cards to the more efficient and “programmable” virtual card approach as corporate travel payments switch to putting virtual cards on travelers’ mobile devices for greater convenience.
Besides issuing virtual account numbers, Wex and its acquired companies will provide credit card processing, electronic funds transfer, and settlement services in 58 currencies.
The companies expect the deal to close by mid-year. Wex is acquiring Optal from private shareholders. Optal is the primary issuer of eNett payments.
Wex expects to continue to provide payment services to Travelport. One of Wex’s biggest competitors is Worldpay. Last year, Fidelity National Information Services (FIS) acquired Worldpay in $34 billion deal, though travel is only one of many verticals that company targets.
What will Travelport do with the funds when they clear? One tantalizing clue came earlier this month with the company hired John Elieson to oversee strategic oversight of Travelport’s growth strategy, sales organization, and acquisition agenda. Before joining Travelport, Elieson was president and CEO of Radixx, a company that built airline passenger services systems and was acquired by Sabre last fall. So Travelport might want to boost its airline technology services, in a reversal from a move of focusing on distribution in recent years.
Have a confidential tip for Skift? Get in touch
Photo credit: A shot of Melissa Smith, Chair and CEO of payments company Wex, while speaking during a Ted Talk. Smith led the acquisition of eNett, a travel sector payments company. Wex