KUHN CAPITAL Monday, March 19, 2018
Dispatches from the front

PE Groups Buy Entire Industry

Or nearly so. PE groups are now owners of the three largest travel reservations businesses. The industry is enduring turbulent times: with PE groups at the controls, will investors see a soft or hard landing?

This month Silver Lake and Texas Pacific agreed to buy the world’s largest stand-alone reservations system, Sabre Holdings, for about $5B. At nearly the same time, Blackstone Group’s portfolio company Travelport is purchasing Worldspan for about $1.5B.

The third major player, Amadeus, was itself the object of an MBO featuring PE groups and airlines in 2005.

Consumers will know Sabre by its Travelocity brand, just one piece of Sabre’s global empire. The company is generating about $2.8B in sales, up nearly 20% over last year, while net income dropped from $172M to $130M.

Blackstone’s Travelport owns Galileo, the engine behind Expedia, Hotwire, Orbitz, and Priceline. Travelport generates sales of about $2.5B and is losing money as management focuses on a turn-around.

Travelport’s target, Worldspan, is seeing sales of about $850M with net income of $62M, down from sales of $960M and net income of $72M in 2005. So in buying Worldspan, Blackstone controls reservation industry revenues of about $3.4B -- the new king of the hill.

Meanwhile third-place Amadeus has 2005 sales of about $1.6B, down 40% from the prior year, but it is -- for the moment at least -- the most profitable of the group with $209M in net income.

As is obvious from the uneven financial performance of the players, the $10B global reservations business is brutally competitive, racked by Internet-borne price reductions at the same time that management must accommodate unprecedented investments in new technology. Success will demand world-class operating and financial management talent. Stay tuned as we report unfolding events in this highly visible test of PE industry wherewithal.

Ryan Kuhn

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