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Olympia London - 26-27 February 2020
Loews Santa Monica Beach Hotel - March 11, 2020
Convene - 730 3rd Avenue, New York City - March 23,
Wex Inc.'s Nicola Morris talks:
Wex Inc.'s January agreement to acquire virtual travel payments provider eNett for $1.7 billion from majority owner Travelport—along with related financial technology specialist Optal—marked the latest major travel payments move for the company, which over the past several years has steadily expanded into new markets and corporate payments verticals. From its roots as a fleet and fuel card specialist founded in 1983 as Wright Express, Portland, Me.-based Wex has grown into a multibillion-dollar global company with an array of corporate spending solutions, with an emphasis on delivering virtual travel payment products via travel management companies. Wex chief corporate development officer Nicola Morris this month spoke with BTN's Adam Perrotta about how the eNett deal fits into Wex's overarching travel payments growth strategy.
BTN: What was the rationale behind acquiring eNett and Optal? What does it bring to Wex?
Morris: In our M&A strategy, we have three priorities we try to achieve: one is to buy into high-growth businesses; two is diversification from broad macroeconomic forces, including fuel prices, which are a big part of [our fuel card business]; and third is around geographic expansion and building out a global presence. Sometimes a deal only accomplishes one or two of those, but we think this transaction meets all three criteria. [Optal and eNett] have a really strong record of growth in a high-growth industry and are a great complementary fit with our existing business.
BTN: It's safe to say Wex still views virtual payment cards as a key growth opportunity.
Morris: Definitely. With all of the capabilities that virtual cards offer around efficiency, security and reconciliation, and because there's still relatively low penetration, I think we see a tremendous amount of growth opportunity still there.
BTN: What about the third criterion? How does the deal fit into Wex's geographic expansion strategy?
Morris: [Optal and eNett] serve a combination of Europe and Asia/Pacific—about 60 percent in Europe and 40 percent in Asia/Pacific. Today, we have a solid but smaller presence in Europe, so this give us additional scale in Europe and a really solid position in Asia. Also [the companies] have little to no presence in the U.S., so that really rounds out a nice geographic complement for us.
BTN: How did the acquisition come about? eNett has been rumored to be on the offering block, and Travelport went private last year. Was that the catalyst?
Morris: We have a long-term view acquisition roadmap that we constantly nurture and keep front and center and discuss with our board. It looks at where we are from business perspective and how things are changing so we can be ready if the time is right and an asset becomes available and we would want to deploy capital [to acquire it.]. Optal and eNett have been on that list going back several years, and as is customary in corporate development, we make sure we've got the relationships with the companies themselves or with banks, so that we're always ready when the time is going to be right to pursue a transaction. So those relationships have been there for years.
BTN: Optal and eNett are somewhat interrelated from an ownership perspective, right?
Morris: Yes, Optal was a minority shareholder of eNett, and Travelport was the majority shareholder when Travelport was taken private by Elliot Management and Siris [in May 2019]. Optal had its own separate private ownership. But the deal was structured as a single transaction with Wex acquiring Travelport's eNett share and the whole of Optal.
BTN: How will eNett and Optal's systems be integrated into Wex's existing infrastructure?
Morris: We don't anticipate closing this acquisition until mid-year, so until then, they're each still running their own businesses. Between now and close we'll work on the integration plan and go through our integration playbook to determine the plan specific to this transaction. You can imagine there will be some level of integration that we'll have in place by closing, and then we'll have a whole deeper integration process that takes place starting immediately after close. We're very excited about this particular acquisition and think there are some great complementary processes, so we're looking forward to getting it approved.
BTN: Getting back to geographic expansion, aside from Asia/Pacific and Europe, are there any other markets you've identified as targets for growth?
Morris: Between our three major operational regions of North America, Europe and Asia/Pacific, we feel really good about opportunities in those areas from a growth perspective. There may be other opportunities to expand that might arise elsewhere, but there's a lot of potential still there in those areas.
BTN: Are there any other high-potential service areas beyond virtual cards you're considering entering?
Morris: Our health, fleet, travel and corporate payments businesses all are in industries that are undergoing major transitions, and there's so much modernization going on that there's a major opportunity for us to bring solutions to those markets and expand our offerings there. So, at this juncture, we're not sure we have a need to enter any new industries or verticals, though we'll continue to look at new solutions and applications for our existing products.
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