Worldspan today said it signed an agreement to be acquired by Travel Transaction Processing Corp., an entity formed by Citigroup Venture Capital Equity Partners L.P. and Teachers' Merchant Bank of Ontario, Canada. Subject to "financing, government and regulatory approvals," Worldspan expects the transaction to close in mid-2003.
"We're quite happy," said Paul Blackney, president and CEO of Worldspan, which is owned by American, Delta and Northwest airlines. "This allows our current airline owners to monetize their investment and focus their energies on their core business, which is operating airlines. We will now have exciting new owners." Terms of the deal were not disclosed.
"We'll continue to have a very strong relationship with our current airline owners, particularly Northwest and Delta, as we continue to operate systems for them and get marketing support from them, much as other GDSs continue to get support from their previous airline owners," said Blackney in an interview today with
Business Travel News.
In interviews conducted during December and January, the heads of Worldspan's three airline owners did not rule out a sale. "We are looking at opportunities to monetize non-strategic assets," said Leo Mullin, chairman and CEO of Delta Air Lines, which owns 40 percent of Atlanta-based Worldspan. "Worldspan is nice to have, but it is not essential." AMR Corp. chairman and CEO Don Carty said the company still considered cashing out its stake in Worldspan as the best option "if we can reach a consensus" with the other two co-owners. "We need to find a customer willing to pay the price of the economics we achieve as a Worldspan owner." American obtained a 26 percent stake in the global distribution system firm when it acquired Trans World Airlines two years ago.
Though Northwest technologically is most closely tied to Worldspan, CEO Richard Anderson said his company's position was consistent with Delta's and American's: "Worldspan is the heart and lungs of the airline and handles 40 percent to 50 percent of all our IT outsourcing," he said, "but we don't have to own it to obtain strategic value." Still, Anderson suggested Northwest's 34 percent ownership stake in Worldspan came in handy. "Holding on to it is a perfectly viable alternative for the owners because it is successful," he said, noting Worldspan's support of such Internet sites as Expedia and Orbitz. "We could continue ownership, take equity out in some form and use it to bring down GDS fees for the owners of Worldspan."
Rumors on the sale of Worldspan were ongoing for several years because of talks with competitors Amadeus, based in Madrid, and Galileo International, the Parsippany, N.J.-based subsidiary of Cendant Corp.
That the proposed acquirers are not travel companies offers "a huge vote of confidence in the strength of Worldspan as a company," Blackney said. He said negotiations on the sale had been ongoing for "some time now," and that the GDS regulations proposed by the U.S. Department of Transportation--poised to rewrite the rules under which companies like Worldspan operate
(BTN, Dec. 9)--were "clearly not central" to the talks. Blackney added that Worldspan grew revenues and profits in 2002, compared with both 2001 and 2000.