Travelport Agrees to Sell Enett to Wex at a Bargain Price

Wex, a business-to-business payments company, said it had bought eNett and Optal from Travelport for $577.5 million in cash — far less than the $1.7 billion price Travelport expected in January.

“I can confirm that the sale of eNett and Optal to Wex is now complete,” a Travelport spokesperson said on Wednesday. “ENett, Optal, and Wex agreed to a settlement, which resolved all outstanding litigation, and the transaction is now closed.”

The deal lets Wex scale up business-to-business payments solutions for a travel sector that often is still using fax machines to settle bills. It lets Travelport focus on its core competency of distribution.

UK-based Travelport expected much more cash when it announced the $1.7 billion sale in January. Travelport had majority ownership in eNett, with Optal as a minority owner. But the Portland, Maine-based buyer, Wex, said in May that it was walking away from the agreement because the pandemic had reduced the payment tech providers’ value. Travelport had asked a U.K. court to force Wex to keep its purchase agreement. But a judge’s preliminary look at the case in October favored Wex’s view of the contract, with an appeal slated for May.

For Travelport, the fire sale of eNett will free up little capital for the travel technology capital to reinvest in its distribution technology. The discounted sale, representing only a small multiple on eNett’s estimated $350 million revenue generation in 2019, will also generate little short-term return on investment for private investors’ Siris Capital and Elliott Management’s Travelport takeover in 2019. During fierce, pandemic-related negotiations over financing terms this year, Travelport’s lenders wanted to ensure that the company used proceeds from the sale to pay down debt.

Both Travelport and Optal had been itching to sell eNett but fought with each other over acceptable outcomes as bids came in during 2018, as financial filings revealed. By not accepting offers sooner, they ended up with a drastically reduced price after the surprise pandemic.

Wex’s Plans for Travel Payments

The travel sector will now watch to see what Wex does in travel. Wex didn’t have some eNett products had, such as mechanisms to let online travel agencies use their balance sheets to make payments on their behalf on a near real-time basis.

Wex’s travel volumes were down between 45 percent and 60 percent between the weeks ending July 3 and October 23 relative to the same period a year earlier, which drove a 35 percent revenue decline year-over-year in Wex’s corporate and travel payments segment during the third quarter of 2020, the company reported.

One key question is: To what extent does Wex want to get involved in the corporate travel management agency mid-office by automating processes? The mid-office market is dominated by SAP Concur, with Serko gaining in Asia-Pacific and a handful of players. But a surprising number of travel management companies and agencies still do old-fashioned faxing and sending of email attachments. There’s room for innovation in batch processing, current data messaging languages, and encrypted email solutions.

Wex also gets from this deal eNett’s expertise in handling travel payments designed for the merchant model, or pre-pay model. That model is more common than the agency model, like when you book with an online travel agency, which is more common 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, payment complexities.

Wex and its acquired companies help support the use of virtual cards, which now account for around 14 percent of business travel payments. Virtual cards’ rise 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 a few dozen currencies.

As part of Wex’s purchase, former eNett managing director and CEO Anthony Hynes joined Wex as president of its new travel division.

Haynes had famously pitched selling eNett to Travelport in the first place in 2013 by insisting on hopping in then-CEO Gordon Wilson’s taxi cab to the airport after Wilson had canceled a pitch meeting. The payments unit went on to be the fastest-growing unit at Travelport for years.

UPDATE: Article has been corrected to reflect the correct location of Wex, the correct appeal month, and a correct description of the agency model.