Skift Take

Behind the investor appetite as American Express Global Business Travel prepares to go public.

Several travel and hospitality companies are poised to make their stock market debuts later this year, with one in particular that may stump a lot of people as it operates in the corporate travel sector — a sector that’s been devastated by the pandemic.

Yet American Express Global Business Travel, the world’s biggest corporate travel agency, could see its shares trading on the New York Stock Exchange in the first half of this year, if a planned merger with its special purpose acquisition company (or SPAC) partner Apollo Strategic Growth Capital goes ahead.

Covid has wiped out revenue for most travel management companies since March 2020, and with Omicron spreading they aren’t out of the woods yet. Nor is the long-term future certain with the debate around video conferencing replacing large chunks of travel.

But investors are rallying round, despite the agency’s estimate it may only see travel volumes return to 70 percent compared to before the pandemic. CEO Paul Abbott has said he wanted to undercut some of the most optimistic projections and create a floor for investors. It may have worked.

Getting On Board

At the tail end of last year what appears to be a new investor to travel, Sculptor Capital Management, took a 5.55 percent stake in Apollo Strategic Growth Capital. Sculptor traditionally focuses on a range of products across “multi-strategy, credit and real estate.”

If the deal with Amex GBT does go ahead, Apollo Strategic Growth Capital’s public shareholders would own 15.4 percent of the post-combination company, which will be called Global Business Travel Group, Inc. Sculptor would end up owning just under one percent of the new business, whose value is being placed at $5.3 billion. While a relatively small investment, it speaks volumes about how investor interest has been piqued by what some are declaring a “recovery industry.”

Apollo Strategic Growth Capital does not comment on individual investors, but its CEO, Sanjay Patel, told Skift he was a “big believer in the recovery of best-in-class franchises across travel, hospitality, gaming and other Covid-impacted sectors.”

More investors will likely follow, according to one expert.

“I think it’s a good area to focus on,” said one venture capital executive not associated with Apollo and who wished to remain anonymous. “Now that we are entering 2022, more investment firms are focused on the travel recovery and what those investment returns could be. The general consensus is that corporate travel will never return to 2019 levels so any indication that travel recovery is above the 70 percent projected by Amex GBT will reward investors handsomely.”

Another expert said many investors now regarded travel as a recovery play, and believe there’s an upside.

“And it’s interesting they’re choosing intermediaries, rather than airlines. Say there’s a 10 percent upside to the base case, the upside could be quite tasty,” said Martin Warner, principal at MW Travel Consultancy.

What makes the Amex GBT deal unique (for now, at least) is that other travel companies are investing, which shows a renewed faith in the agency model, despite airlines and some other suppliers seeking to connect more directly with company travel buyers.

Travel technology giant Sabre, for example, is also investing in Amex GBT as part of the deal. It’s perhaps no coincidence that Kurt Ekert, former president and CEO of business travel management company CWT, became its president on Monday.

Its equity grab gives Amex GBT some much needed cash, as the merger could generate $897 million in gross proceeds for the travel agency, and sufficient funds to acquire other agencies. But for Warner, it’s also representative of a supplier deal. “It lends itself to Amex GBT trying to protect the legacy global distribution company,” he said. “The airlines shifted so much to have new commercials with the global distribution companies, under the guise of New Distribution Capability content, but it’s really a change of commercial arrangements.”

Sabre’s investment could also open the door for other agencies, such as CWT or BCD Travel, to turn to Amadeus or Travelport and ask for similar investment.

Will It Last?

Amid the dealmaking, some warn that the SPAC frenzy may be short lived. As far back as May last year, one investor said the scene had become crowded.  “A lot in the pipeline will probably pull back,” said Carl Sheperd at the Skift Live Short-Term Rental and Outdoor Summit. “There’s hundreds of billions tied up chasing unicorns. They’re called that for a reason. With that much money chasing so few opportunities, you realize it might not be the best time.”

Amex GBT is just one of several deals waiting in the wings, alongside Sonder; other SPACS, also known as blank check companies, exist to merge with companies and take them public, and Altimeter Growth Corp 2, Altitude Acquisition Corp, Accor Acquisition Co and Go Acquisition Corp have yet to find new homes, with the latter in the media recently due to a debate over whether SPACs should face more regulatory controls.

Meanwhile, a report in September 2021 highlighted how investors were pulling their cash out of SPACS at increasingly higher rates. But for now the corporate travel sector is enjoying its time in the limelight as it evolves for the post-pandemic landscape.

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Tags: amadeus, american express global business travel, bcd travel, certares, coronavirus, corporate travel management, covid-19, ctm, cwt, investors, private equity, sabre, spac, travel management, travelport, Zoom

Photo credit: Private equity firms are seeing potential in corporate travel. Zhenzhong Liu / Unsplash

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