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American Express Global
Business Travel’s newly announced acquisition of rival CWT
would be a merger of
giants but might not face the regulatory scrutiny that has quashed recent major
mergers in the travel industry.

The $570
million acquisition, which would be one of
the largest mergers of travel management companies in recent history, would add
about 4,000 customers from CWT to Amex GBT and boost its total transaction
volume by 45% and revenues by 33%, Amex GBT CEO Paul Abbott said in an
investors’ call on Monday. CWT this year is projected to have $14 billion in total
transaction value and $850 million in revenue, Abbott said. Amex GBT in its
fourth-quarter earnings report
 gave full-year 2024 guidance of
between $2.43 billion and $2.5 billion in revenues.

Abbott said the deal is
“highly accretive” and is “forecast to break even in [earnings
per share] in year one.”

“Joining forces
with Amex GBT helps accelerate our vision of a tech-enabled future for business
travel, where people and technology combine to deliver an exceptional customer
experience,” CWT CEO Patrick Andersen said in a statement. “We are
highly confident in the value creation of the combined company.”

In terms of customers,
Abbott said CWT has “a strong presence in high-value segments”
including energy, resources and marine travel; media, entertainment and sports;
and defense and government. 

Amex GBT has “a
footprint in some of these, and it will give us significant volume to create
dedicated verticals.” The acquisition also will grow Amex GBT’s small and
midsized enterprise business by 35%, according to Abbott. The small- and
medium-enterprise segment has been a focus for CWT as it has for Amex GBT, such
as its small
business offering in partnership with Booking.com.

“Through the
integration of CWT, we will grow our footprint in high-value industry
verticals, expand our professional services businesses and bring more customers
onto our software solutions to further differentiate our business and add
significant value,” Abbott said.

Amex GBT CFO Karen
Williams said AI and automation is a “significant opportunity” in the
acquisition, tapping generative AI use cases that are within the
myCWT platform.

Per the deal, which both travel management companies’ boards have approved, Amex GBT will finance about $430 million of the
transaction by issuing about 71.7 million shares of its common stock at a fixed
price of $6 per share, a move that also will diversify the TMC’s shareholder
base, Abbott said.

Amex GBT will retire
CWT’s debt with cash on hand, he said. Following the transaction, CWT
shareholders – which are largely investment funds, following a prepackaged
Chapter 11 filing and recapitalization process
 that began in
2021 – will own about 13% of the combined company, Williams said.

Regulatory challenges?

The TMCs said they
expect to close the transaction in the second half of this year, though that
will depend on regulatory approval in what has proven to be a difficult
regulatory environment, at least in the United States, as of late. 

JetBlue and
Spirit,
 for example, earlier this month called off a planned
merger amid regulatory challenges, and Choice Hotels International also abandoned a
hostile bid to acquire Wyndham Hotels & Resorts
, a move the
Wyndham had rebuffed citing a difficult path to regulatory approval.

Amex GBT acquiring CWT
is certainly a merging of giants in the global corporate travel management
space. 

Among BTN Europe’s
ranking of Europe’s leading TMCs
, Amex GBT in 2023 ranked first and
CWT third, outranked only by BCD Travel. In the broader space of travel
sellers, Amex GBT last year ranked third on BTN sister publication Travel Weekly’s 2023 Power List,
behind Booking Holdings and Expedia Group; CWT ranked fifth, again behind BCD.

Even so, some analysts
said they do not expect pushback from regulators in the deal. For one, this is
a “midsized transaction” compared with, for example, the proposed merger
of Booking Holdings and Etraveli, which the European Commission blocked last
year
, said Morgann Lesné, a travel technology mergers and acquisitions
expert with Cambon Partners.

“These are not the
typical giants the antitrust authorities are after,” he said. “The EU
Commission probably has better things to do than try to regulate midsized
transactions. 

Although it makes a lot
of noise in the market, in terms of size, it is quite modest.”

A CWT acquisition is
hardly Amex GBT’s first foray in bringing in a large competitor, though it is
proportionally larger than its two most recent major mergers. The
2018 acquisition of HRG
– a
£410 million acquisition of what was at the time the fourth-largest TMC – boosted
Amex GBT’s TTV by 25%, according to Williams. The
2021 acquisition of Egencia
 added
27% in TTV, she said.

Also pointing in favor
of regulatory approval is that the merger could be an existential necessity for
the TMCs, according to Lesné. 

He said he was
“surprised” by the price Amex GBT is paying for CWT, calling it an
indication that CWT “was not in great shape,” and he said it
“puts a light on the real threats for [CWT] to stand alone.”

As such, Lesné said he
expects there will be “some investigation” and “commitments with
regards to employment” on the path to consolidation, but he said he is
hopeful it will be approved.

“It’s not like it
is an extremely profitably company buying another profitable company,”
Lesné said. “It’s two companies that are fighting to survive, especially
[CWT.] Regulation can have an impact, but when the survival of an industry is
at stake, they will have more open views on the situation.”

Former American Airlines
executive Cory Garner’s eponymous consultancy in a LinkedIn post on Monday also
said he did not expect any major challenges to the acquisition by antitrust
regulators.

“There will
certainly be some raised eyebrows among airlines, hotels, smaller competitors
and large multinational corporate travel clients, since the largest legacy TMC
by far is acquiring one of its only global competitors,” Garner said in
the post. 

“However, in our
view, it is too difficult to narrow the market’s definition to only the global,
legacy TMCs. The corporate travel management market has seen new entry from
next-gen TMCs like Navan, AmTrav, TravelPerk, Spotnana and others and is under
new pressure from airline distribution strategies to attract corporate
travelers to their own website.”

Even so, Garner
questioned whether it the acquisition is a good business move by Amex GBT,
especially given ongoing challenges to the legacy TMC model based on
commissions and global distribution system incentives. He said a combined Amex
GBT-CWT would not necessarily continue to grow at the same pace as they were
independently.

“Implicit in this
assumption is that nearly all CWT clients will be happy to remain with GBT
through a potentially messy transition, notwithstanding the possibility that at
least some of them chose CWT precisely to avoid GBT,” Garner said.

Lesné, meanwhile, called
the acquisition a “good signal” for the industry.

“Amex has a very
robust technology with the KDS platform, and CWT will benefit from the advance
of technology,” Lesné said. “In terms of commission, size might
command lower commissions at some point or a higher level of service, but customers
will still have choice, because if they’re not happy with the way they are
treated by Amex, they can move to Navan or TravelPerk.”

He added that it’s an
indication of a “stronger market” for M&A activity in the travel
tech side, for both corporate and leisure travel. Garner also said to watch for
“knock-on” decisions that other players might make in response.

“For example, SAP
Concur has the largest client base of any online booking tool and could see
this as a long-term strategic threat to their market position,” according
to Garner. “What is their best move?”

*This article originally appeared in Business Travel News.



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