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- ASX 200 travel company Corporate Travel Management (CTD) is set to acquire Travel and Transport for US$200.4 million (roughly A$282.9 million)
- Travel and Transport was founded in 1946 and has grown to become a leading travel management company based in Nebraska
- Last year, the business generated total transaction value (TTV) of US$2.8 billion (roughly A$3.9 billion) – 60 per cent of which came from corporate air travel and around 30 per cent from hotels
- CTM believes the acquisition is highly compelling and beneficial to its business and to its customer offering
- To fund the acquisition, the billion-dollar company will raise around $375 million through a non-renounceable entitlement offer to eligible shareholders
- The leftover funds will be used for acquisition and integration costs and will provide further liquidity and balance sheet flexibility
- The acquisition is expected to be finalised next month
- Company shares last traded for $16.16 on Friday, September 25
ASX 200 travel company Corporate Travel Management (CTD) is set to acquire Travel and Transport for US$200.4 million (roughly A$282.9 million).
The transaction is expected to be around 10 per cent earnings per share accretive on a pro-forma CY19 basis, excluding synergies, or 30 per cent accretive including synergies.
Travel and Transport was founded in 1946 and has grown to become a leading travel management company based in Omaha, Nebraska.
In 2019, the business generated total transaction value (TTV) of US$2.8 billion (roughly A$3.9 billion) and pro-forma earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$29 million (roughly A$40.9 million).
Importantly, over 60 per cent of TTV in 2019 came from corporate air travel and around 30 per cent from hotels.
Travel and Transport also own Radius Travel which operates a leading hotel program that partners with major hotel brands in 160 countries.
“Travel & Transport has been in business for 74 years, growing from a one-person operation in Omaha, Nebraska, to one of the largest corporate travel management companies in the US,” Travel and Transport CEO Kevin O’Malley said.
“We are excited about the opportunities for our people and our clients by becoming part of a growing, world-class travel management company,” he added.
Acquisition rationale
The ASX 200-lister believes the acquisition is highly compelling and beneficial to its business.
Once combined, CTM will be able to strengthen its position as a leading mid-market corporate travel manager with $10.8 billion TTV and North American TTV of US$3.6 billion (roughly A$5 billion).
CTM also considers Travel and Transport’s financial and professional services clients and global hotel program to be highly complementary in servicing international clients and enhancing its customer offering.
“Travel & Transport has an incredible reputation and a long history of success within the global travel industry, and we have shared views about delivering personalised service and proprietary technology to generate strong returns for clients on their travel investments,” CTM Founder and Managing Director Jamie Pherous said.
The acquisition is expected to be completed in late October.
Equity raising
Corporate Travel Management will fund the acquisition through a fully underwritten accelerated non-renounceable entitlement offer to raise around $375 million. The left over funds will be used for acquisition and integration costs, provide additional liquidity and balance sheet flexibility.
Yesterday, the billion-dollar travel company entered a trading halt ahead of this capital raise.
CTM reported significant losses, including a $99.5 million drop in annual revenue, over the 2020 financial year. However, the company stated its results exceeded previous expectations.
Nevertheless, the fresh funding will provide immense financial support on a number of fronts.
A total of 27 million new shares will be issued which is the equivalent to around 25 per cent of CTM’s total outstanding shares once the entitlement offer has been completed.
The entitlement offer will be broken up into an institutional entitlement offer and a retail entitlement offer. Eligible shareholders may subscribe for one fully paid ordinary share for every 4.03 CTM shares they hold on Thursday, October 1.
Shares will be offers at $13.85 each which represents a 14.3 per cent discount to the last traded price of $16.16 on Friday, September 25.
The institutional component has just opened and will close on Tuesday night, September 29. New shares will be settled on Wednesday, October 7 and will commence trading the next day.
The retail component will open on Tuesday, October 6 and will close on Thursday, October 15. New shares under the retail offer will be settled on Wednesday, October 21 and will begin trading on the following day.
Once the equity raising has been completed, CTM will have a net cash position of $126.8 million, with £100 million (roughly A$181.5 million) of additional liquidity from an undrawn finance facility.
Company shares last traded for $16.16 on Friday, September 25.
