Cendant Corp. today announced the sale of its travel distribution services unit, Travelport, to an affiliate of The Blackstone Group for approximately $4.3 billion.
Travelport president and CEO Jeff Clarke this morning told
BTN that the next few months would bring "the perfunctory closing-the-deal type stuff," such as regulatory approval, but expects the transaction to close by the end of August. "It may sneak into September, but we don't see any roadblocks," Clarke said.
As a private equity firm, The Blackstone Group's modus operandi sometimes has been about buying to sell, but Clarke said pieces of Travelport—including the Galileo GDS and Orbitz, among other units—would be kept whole as the company embarks on a growth strategy.
"Blackstone is definitely aligned with the strategy we have, which is to be the broadest travel distribution company in terms of geography and mix of business," Clarke said, noting Travelport's various business, including the Galileo global distribution system, the "online empire" that includes Orbitz, Cheaptickets and EBookers, as well as Gullivers Travel Associates, a wholesale business. "Our strategy in acquiring the companies at Cendant was to build the most diversified and broadest distribution company and Blackstone understands that. We expect to build on that," Clarke said.
Blackstone also plans on keeping the management team intact. Clarke said, "We're quite pleased that they have been positive in their interest in retaining the management team."
The selling price of the company's Travelport unit—which previously was known as Travel Distribution Services—slightly exceeds what Cendant paid for both Galileo and online booking agency Orbitz: Cendant purchased Galileo for $2.9 billion in 2001
(BTN, June 25, 2001) and Orbitz for $1.25 billion in 2004
(BTN, Oct. 4, 2004).
Proceeds from the sale will be applied to debt associated with Cendant's real estate unit, Realogy, and hotel subsidiary, Wyndham Worldwide, reducing the debt amounts to $750 million and $600 million, respectively. Travelport was set to become its own entity in October, and Cendant said it expects the sale will allow Realogy and Wyndham to simultaneously spin off in late July.
Cendant in May said it had received unsolicited inquiries from several private equity firms and was exploring the sale of Travelport, which, in addition to Galileo and Orbitz, includes Orbitz for Business and global travel content wholesaler GTA. "We'll either sell TDS or spin it off, and we'll do whatever creates the greatest amount of shareholder value," company chairman, CEO and former partner at The Blackstone Group, Henry Silverman, told investors at the time
(BTN, May 1).
Although Clarke today would not say whether another GDS had made an offer for the distribution unit, he said, "There was extraordinary interest in the company from both strategic and financial buyers."
"The plans that we've reviewed with all the prospective buyers really were based on strong growth," Clarke said. "That said, you can always run a tighter ship and we'll always be looking for efficiencies and productivity and continuous improvement, but that said, the primary driver of our improvement and profit plans are growth."