Wednesday, January 24, 2007

2007 - the year of the Travelport break up

As I have been anticipating for some time, 2007 is gearing up to be the year that the three Traveport divisions - GTA, Galileo and Orbitz - are spun off. First rumour (care of e-tid) is that UBS has been appointed to float Orbitz in London at a valuation of US$2.5-$3bil. Why London? Best reason I can think of is to avoid Sarbanes-Oxley regulation. London is liquid enough a market to provide the same capital value as New York or Nasdaq while removing the onerous/costly burden of SOX compliance.

UPDATE - in related Travelport news here is an interview with Graham Nichols (Worldspan vice president and general manager EMEA) on the merger between Worldspan and Galileo. The questions I most want to ask is "What is the future of the Worldspan brand?". Here is Graham's answer (or non-answer as the case may be)
Should the merger proceed as expected, Worldspan will become a Travelport company and will operate under its own brand, similar to how Galileo currently operates. Until we are merged we will operate as two separate companies.

7 comments:

Travolution Blogger said...

Our sources in the US suggest Orbitz, if the story is true, could indeed be listed in London but for the same reasons as you predict, BOOT, for financial reasons - i.e. regulation, etc, liquidity of the market.

with ebookers on the Travelport books already it would be HIGHLY UNLIKELY that Orbitz would attempt some form of European expansion.

this is dependent, however, on (1) Orbitz itself staying on the books, of course, and (2) the ebookers April relaunch paying off and Travelport not needing to roll out its already successful US OTA into Europe.

Tim Hughes said...

The one positive to the eBookers story for Travelport is that after all the write-downs the company has a book value of near zero. In the words of late eighties disco revivalists - the only way is up....

Chyan said...

I see the need for more work to integrate the disparate Travelport Internet businesses ahead of a spinoff. Octopus and HotelClub also contribute to the EMEA piece, although I'm unsure of the schedule for the two to move onto the Austin platform.

Still, am wondering about rumours of similar spinoff of Opodo, following restructuring. Orbitz + Opodo may be good fit.

Tim Hughes said...

In theory Opodo sounds like a good/better option for Orbitz in Europe than eBookers as Opodo has less offline baggage than eBookers and the current Opodo platform is better than the pre-Austin eBookers platform. However Opodo is not profitable and the last thing Travelport/Orbitz need is another integration headache. So assuming Austin will be delivered on time and works as described then my recommendation to Travelport is to focus on re-invigorating the eBookers brand post-Austin rather than further acquisitions

Chyan said...

Whether Orbitz should or should not buy is one matter (we all know how Sam got himself canned), but conceptually at least, it's a fit even with ebookers in the picture. ebookers is more established in the UK, while Opodo is stronger in mainland Europe.

Would love to understand motivation for Orbitz listing. Is it primarily driven by 1) the desire to turn a quick buck (perhaps to offset the writedowns), or 2) the desire to raise cash for further acquisitions, or 3) both.

Tim Hughes said...

Or option 4 - generate a good return on equity. Have to remember that PE firms work on tried and tested criteria - find a struggling/under-valued business, fix it and sell it. In this case the first round of fix was easy - undo all of the complicated integrations forced by the old Cendant management, put in place new management to replace the scores that fled and clean up the balance sheet. With those things achieved and given the online valuations in the US and Europe a float or sale of all or parts of Orbitz makes sense. The question is not "will or when will Blackstone sell off or float Orbitz " rather will there be something more creative in the disposal (such as selling off of parts of Orbitz before a disposition)

Yeoh said...

Travelport retrenched lots of pple in galileo worldwide. I don't really know what they are doing but they seem to be doing this blindly and there seems to be a trend indicating that they are moving some jobs to India, as usual and the quality of software would suffer.