Carlson Companies will take a majority stake in Carlson Wagonlit Travel, which will buy rival travel management company Navigant International, as exclusively predicted by
Business Travel News(BTNonline, April 6). The two deals were announced in the early hours of this morning.
Carlson Wagonlit's acquisition of Navigant for $16.50 per share—valuing the company at $510 million, including assumption of debt—means the third-largest travel management company in the United States is buying the second-largest. Carlson Wagonlit already claims to be the largest TMC in the world outside North America.
In a second announcement, Carlson Wagonlit's 50 percent shareholder Accor said that it is selling its stake in the TMC to Carlson Companies and private equity investor One Equity Partners for $465 million. The sale increases Carlson Companies' holding in Carlson Wagonlit from 50 percent to 55 percent, while One Equity Partners takes the other 45 percent. One Equity Partners is a private equity affiliate of JPMorgan Chase, managing $5 billion of investments and commitments for JPMorgan Chase in direct private equity transactions.
JPMorgan Chase also played a part in the acquisition of Navigant. Carlson Wagonlit said it has obtained "commitments" from JPMorgan Chase, as well as Lehman Brothers and Morgan Stanley, to finance the deal. Both the Accor divestment and the acquisition of Navigant are subject to standard shareholder and regulatory approvals. Carlson expects the Navigant deal to be approved within 90 days.
The deals leave Carlson Wagonlit saddled with significant debt, but president and CEO Hubert Joly said the acquisition of Navigant demonstrates the owners' wishes to grow the company. "Our shareholders are voting with their feet by writing a check for $510 million," he said. Questions also will be asked about when One Equity Partners can expect a return on its significant investment, but Joly said that One Equity Partners was "committed to four years in the business."
Carlson Wagonlit announced two personnel changes among senior executives of Navigant. Chairman and CEO Ed Adams will leave after seeing through the transition. CFO and COO Bob Griffith will become an executive vice president of Carlson Wagonlit, reporting to Jack O'Neill, COO for North America. Carlson Wagonlit will retain its global headquarters in Paris. Joly said: "Carlson Wagonlit is a very global company. Where the CEO resides is irrelevant."
The deal nails the coffin lid on the name TQ3 Travel Solutions, which briefly challenged as a powerful force in global travel management when it launched in 2001. However, the brand was seriously weakened when Carlson Wagonlit bought Maritz Travel, the original North American partner in TQ3, in March 2004. TQ3 simultaneously replaced Maritz with Navigant, but then the interests of TQ3 European and managing partner TUI were bought on Jan. 3 this year by BCD Holdings of the Netherlands.
This left Navigant with ownership of the TQ3 name and a strong presence in the United States, but negligible interests in the rest of the world. Initially, Adams said Navigant would rebuild the TQ3 network, but that intention evaporated once Carlson Wagonlit showed interest in buying the company. "The business travel sector is experiencing a period of consolidation and aligning with the leaders of the future is the right decision for all of our stakeholders," said Adams this morning.
Joly said the company would take its time with the merger, which will be superintended by David Moran, who also led the integration of Maritz in 2004.
As for Carlson Wagonlit, today's deals reaffirm the mantra of its former president Hervé Gourio that the company would be an acquirer, not one of the acquired. Buying Maritz increased its size in the United States by one-third and now gobbling up Navigant means it is the second-largest travel management company in the United States. Precisely comparable figures are elusive, but in 2004 Carlson Wagonlit recorded 5.2 million ARC-processed air transactions in the United States. Navigant claimed 8.1 million transactions in the same year, but BTN could not verify this figure. Similarly, American Express reported 16.3 million transactions for North America.