Swiss travel operator Kuoni Holding AG said Monday it is acquiring Gullivers Travel Associates for $720 million from privately held Travelport to expand its online vacation reservations business.
The disposal of the U.K.-based hotel and sightseeing specialist streamlines the portfolio of private-equity-backed Travelport, which has attracted on-again, off-again speculation about a potential initial public offering.
GTA, which had net revenue of $294 million last year, buys hotel-room inventory and other travel services at a discount and sells it on to wholesalers.
"Gullivers Travel is a high-quality business that ticks all our boxes," Peter Rothwell, Kuoni's chief executive, said on a conference call. "The transaction should enable us to grow both businesses, without any redundancies," he added.
Kuoni plans to finance its largest-ever acquisition with a 250 million-Swiss-franc ($279 million) rights issue and bank lines of credit.
The transaction continues a recent resurgence of deal making in the travel industry, including last month's €450 million ($630 million) sale by Amadeus IT Holdings SA of its Opodo online-reservations unit to buyout firms Permira and Axa Private Equity.
Travelport's legacy company acquired GTA in 2005 for $1.1 billion only to take an $830 million noncash impairment charge on the business two years ago. The business had revenue of $1.89 billion last year, accounting for around 10% of Travelport's total.
Travelport derives most of its revenue from its ownership of Sabre, Worldspan and Galileo, three global systems that gather and disseminate airline fares and schedules to the travel industry. The company, owned by Blackstone Group LP, One Equity Partners and Technology Crossover Ventures, also has a controlling stake in online travel agent Orbitz Worldwide Inc.
It declined to comment on whether the GTA sale—expected to close in May, subject to shareholder approval—could see it once again explore an IPO. "This transaction enables us to follow our strategy of enhancing the potential of our core business," Travelport said in a statement.
The GTA sale price represented a multiple of 8.4 times to last year's operating earnings.
Travelport said net proceeds would be used to pay down debt. The company said it expects to report 2010 operating earnings of $545 million and net revenue of $2 billion—both excluding GTA—when it releases 2010 results on March 30.
Kuoni expects the merger to realize cost savings and synergies of around 25 million francs by 2014, with most of these coming in information technology and infrastructure areas.
The merger, "while relatively small compared to the size of the travel industry, is a further indication of the ongoing consolidation trend in the sector," according to Patrick Hasenboehler, analyst at Bank Sarasin & Cie.
Kuoni shares ended down 0.2% at 432 francs in Swiss trading.
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