HR, Block To Sell Rosenbluth To Amex

Hal Rosenbluth and the Block family will sell Rosenbluth International to American Express for an undisclosed sum, according to an agreement announced today by officials from both mega agencies. The new Amex would handle close to $20 billion in worldwide T&E volume. The two megas already work with nearly half of the volume of the 100 largest corporate travel spenders in the United States--almost all of which also are significant multinational travel buyers--according to Business Travel News research on 2002 spending.

If regulators approve the deal, the first concern among large buyers is whether having one fewer competitor hinders their ability to negotiate competitive transaction fees. Responding to such concerns, American Express Global Travel Services president Charles Petruccelli cited the classic principle of nature abhorring a vacuum and said, "I guarantee others will be coming in."

American Express said it expects its agreement, which ends months of shopping by the Rosenbluth and Block families, to be consummated within months. Terms of the transaction were not disclosed. Assets that are excluded from the deal include some joint ventures and Rosenbluth's UpStream unit, whose 700 employees and call centers will be retained by Rosenbluth's current owners. Chairman and CEO Hal Rosenbluth said he will help with the integration process before leaving behind his generations-old family business. Excluding UpStream, Rosenbluth International has approximately 3,600 employees worldwide.

Amex said the transaction is expected to have no material impact on its earnings per share in 2003, but will be "neutral to slightly accretive to EPS in 2004 and 2005, with additional benefits expected in future years."

Petruccelli was reluctant to give details on the integration, particularly as they relate to employment and technology issues. Rosenbluth, for example, is Galileo International's biggest agency user, while Amex is tighter with Sabre. Eclipse Advisors, the Rosenbluth unit built around Rosenbluth's Dacoda analytical tool, is part of the deal, officials said.

According to Rosenbluth, he and other officials spent months seeking the best partner with which to combine. "The industry needs to consolidate and we were determined to lead that consolidation," he said, referring to "significant due diligence" leading to the conclusion with American Express. While the Rosenbluth name "will disappear" after Hal is finished helping with the integration, officials would not speculate on the fate of other company officers.

"Retaining customers is a key part of the deal, but we're not disclosing any terms," added American Express Global Corporate Services president Ed Gilligan.