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Westin Copley Place - September 10, 2019
the world’s largest travel management companies are set to merge after American
Express Global Business Travel offered up to 410 million British pounds to buy Hogg Robinson
will combine with Hogg Robinson’s TMC business HRG. Hogg Robinson also
confirmed a separate agreement to sell its other division, the payments and
expense management software-as-a-service business Fraedom, to Visa for 141.8
million British pounds. Hogg Robinson said the bid from Amex GBT was unsolicited and came when
it was already in early discussions to sell Fraedom to Visa.
Hogg Robinson’s directors have recommended Amex GBT’s offer, which is scheduled to
close next month and take effect in the second quarter of this year. The
directors have also given an irrevocable undertaking to agree to sell their
combined 1.33 percent shareholding in the group, of which 0.99 percent is held
by CEO David Radcliffe and 0.16 percent by COO Bill
Robinson’s largest shareholder, Boron, which holds 23.87 percent of shares, has
given a similar undertaking, as has Dnata, the second-largest. Boron is the
investment vehicle of John Fentener van Vlissingen, who owns another top five
global TMC, BCD Travel. Dnata is a Dubai-owned sister company to Emirates and
manages part of HRG’s global network.
offer needs to be accepted by 75 percent of shareholders to be completed.
Regulatory approval will also be needed in various jurisdictions, including the
European Union and the U.S.
According to the
offer document, there will be an expected "overall
potential job reduction of between approximately 6 and 8 percent of the total combined
group full-time equivalent workforce, with headcount reductions expected to be
made, in particular, across corporate, service delivery, commercial, information
technology and meetings, groups and events within the combined group’s various
locations and geographies. It is proposed that any headcount reductions would
come from across the combined group and not solely from the Hogg Robinson
workforce. GBT’s and GBT Holdings’ aim is to retain the best talent from across
the combined group."
people work for HRG, of which 5,000 are employed directly in 25 countries and
another 7,000 work for partners in a further 100 countries. Amex GBT employs
12,000 people in nearly 140 countries.
In a prepared
statement, Radcliffe said: "I am particularly excited and heartened by
American Express GBT’s reassurance that it will be utilizing the best talent
and technology from within both organizations to create a truly world-class,
leading-edge organization, which will bring benefits to our clients, colleagues
and supplier partners alike."
The offer document said the "significant
opportunity to remove costs" was a key reason for Amex GBT wanting to buy
Hogg Robinson and that “certain support functions ... do not need to scale in
order to achieve incremental volumes. Such functions include global client
solutions, learning and development, quality, service transformation,
implementation and workforce management."
The offer also stated that the “value
of the acquisition is principally in GBT’s ability to achieve a greater global
presence and better serve customers’ needs." It claimed that the two
companies offer "a complementary product range, distribution channels and
Amex GBT also hinted that another
reason for its interest is HRG’s independent technology. “The combined group
will capitalize on Hogg Robinson’s long history of leveraging technology to
attract and retain customers, evidenced by Hogg Robinson’s iSuite, online and
mobile apps,” the offer said.
Amex GBT submitted its offer for
HRG Sept. 7, 2017. Although the business travel industry’s usually hyperactive
bush telegraph failed to get wind of the news, a deal between the two had
looked a distinct possibility ever since Amex GBT was formed as a joint venture
in July 2014 between American Express and the Certares consortium of investors.
With a huge war chest, the only significant
acquisition Amex GBT had made until now was online booking and expense tool
provider KDS. A big buy, most likely of another top TMC, seemed likely to
fulfill the JV’s original strategic intentions, and Hogg Robinson looked
the most likely acquisition target. Hogg Robinson revenue have fallen for several years,
while profit and share price growth have been limited.
An investment analyst who tracks Hogg Robinson, speaking on condition of anonymity, said: "This is a very neat
solution to have one half of the business bought by one company and the other
half by another. It realizes the value that has been in Hogg Robinson for some
time. Fraedom has clearly gone from an
embryonic division to something that is now quite valuable and which the market
hadn’t given it credit for. I think shareholders will bite their hand off.”
There is no word on what the
combined group will be called or how it will be run, but the likelihood must
now be that the Hogg Robinson Group name, which traces its origins to the
1840s and is one of the best-known in corporate travel, will disappear.
The final price Amex GBT pays
will be determined by the timing of the disposal of Fraedom to Visa, a deal that
is scheduled to take place by March 12. If Fraedom is disposed of first, Amex
GBT will pay 120 pence per share. If it happens afterward, the price reduces
to 110 pence per share, valuing Hogg Robinson at 376 million British pounds instead. The Hogg
Robinson share price leaped from 78 pence to 117 pence on this morning’s news.
Correction, Feb. 9,
2018, 11:10 a.m., Eastern: An earlier version of this article asserted that
HRG did not have a detailed succession plan for when key executives retire. HRG
commented: "We do have a succession plan as we are required to do as any
well-governed organization." To that end, HRG "has seen at least two
new C-suite appointments in the last three years." Further, the same sentence noted that Hogg Robinson CEO David Radcliffe
was in his sixties, which the company called "irrelevant and
immaterial." The sentence has been removed.
Update, Feb. 9, 2018, 8:50 a.m., Eastern:
Analyst comments were added to this article.
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