<B>Sabre To Get GetThere</B>
By Jay Campbell
Sabre Holdings' acquisition of GetThere Inc. would create a giant in corporate booking, with current combined placement in 37 of the 67 CT100 corporate accounts that told BTN they had selected a system.
While buyers never enjoy losing a competing supplier, travel managers and other observers suggested that this business still is so new and adoption rates so low that bids for corporate accounts will remain hotly contested. The merger likely will prompt some existing Sabre BTS and GetThere customers to look elsewhere.
Sabre will acquire GetThere for $17.75 per share, or $757 million. Some called it a hefty price, with the exception of GetThere's minority shareholders who had bought in for more per share. But analysts said it is unlikely they will mount successful resistance to a board of directors that unanimously approved the deal, including majority owners American Express and United Airlines parent UAL Corp. Shareholders will choose whether to tender their shares this week.
Observers said the government probably will not try to regulate the deal, nor are other capable suitors interested enough to make a counteroffer.
Sabre intends to close the acquisition after it receives Justice Department approval, which it expects next month.
The new Sabre subsidiary will have 2000 revenues of approximately $50 million, with a corporate customer base of an estimated $28 billion in travel purchasing, Sabre said. The companies expect the new subsidiary, which will keep the GetThere name, to become profitable in late 2001. GetThere will be combined with Sabre's BTS unit, and will retain its Menlo Park, Calif., base of operations.
"The corporate online space is very competitive, but there will no longer be any argument about who is the leader," said Sabre chairman, president and CEO William Hannigan in a conference call last week with analysts. "I don't anticipate any [regulatory] challenge."
Corporate travel managers were divided last week on whether the acquisition is something to be concerned about. Said one, "There aren't too many good [booking products] to choose from as it is. This will limit the options even more." But according to another, "There is enough choice and there will be other mergers to provide better platforms and better systems."
Said Stamford, Conn.-based Management Alternatives consultant John Heilner, the move "lessens competition in a field that has already begun to shake out, which is never good for purchasers. While new, small companies seem to announce ventures in self-booking from time to time, I can't recall any that have really made it to the level of 'serious competitor' lately. It takes deep pockets and great technology to play in the top level self-booking game these days."
Nonetheless, very few travel managers supported federal intervention.
Hannigan emphasized that the agreement will give "GDS-independent connectivity" to BTS and noted that GetThere's plans for direct connections would continue. "This deal is not about GDS booking fees," he said.
Others were skeptical about just how independent the new GetThere will be. Currently, the market is in large part divided along GDS lines. In other words, Sabre BTS has no customers who use Apollo/Galileo and most of GetThere's customers do, though GetThere's client list includes users of all four GDSs.
GetThere chairman, president and CEO Gadi Maier said Sabre processes about a quarter of GetThere's bookings.
"Sabre now has the opportunity to switch the underlying GDS for many of the GetThere.com customers as the majority of segments presently go through Apollo/Galileo," said consultant Norm Rose of TravelTechnology.com. "Sabre scores well on the support side of the equation, but the conflict is that many corporations chose GetThere due to their independence from a GDS or agency, and the Sabre acquisition makes this issue somewhat muddy."
For its part, Galileo pledged continued support for the GetThere product--while noting that it will offer its own system next year (BTN, Aug 14).
Worldspan president and CEO Paul Blackney said, "Customers won't have trouble linking [GetThere] from our side, but when this transaction closes, GetThere is clearly Worldspan's competitor. We'll be sure that we have competitive offerings."
Other competitors also were suspicious of GetThere's independence.
"GetThere is not GDS-independent," said TRX's chief technology officer, Steve Reynolds.
By all accounts, Sabre has a tough task ahead of it in terms of merging the respective companies' corporate cultures and technologies, and retaining both their employees and customer bases.
Contrasting the still-startup nature of GetThere Inc., formerly Internet Travel Network, one GetThere employee said, "Sabre is as old line as a software company can be, but maybe Hannigan really intends to change the culture and nature of the largest GDS."
Sabre BTS has about 225 employees while GetThere has approximately 400.
As president of the new Sabre subsidiary, Maier will report to Hannigan. Sabre BTS vice president and general manager Scott Smith will lead the corporate market organization.
Smith told BTN that "The company will have an awful lot of freedom and independence; we won't be unduly influenced by big Sabre."
An integration team led by Maier and Tom Klein, Sabre's vice president of emerging businesses, already is in place; no cooperation on sales and marketing strategy and operations will occur until the deal closes.
"BTS works great with agency and HR systems, and we'd definitely not want to lose things like automated upgrades," said Smith. "But GetThere offers the multi-CRS and direct connection stuff. From there, it's just a question of what are the most logical ways to bring the functionality from Sabre into GetThere or the other way around. I hope we'll figure it out over the next six weeks, and I'm hoping that no more than six months goes by before we can say 'Here it is.'
"Technically, some of the application software is very compatible, and a lot of the network and communications components are similar," said Smith. "We don't think the integration is anywhere near tearing it down and starting from scratch."
Skeptics snickered that an integration within six months would mean picking one and throwing out the other.
One big question is how many of the two companies' clients will stick by the new GetThere, and how many current bids will be affected. Even people at Sabre and GetThere admit that they are unlikely to retain all their clients.
"People who make buying decisions still see Sabre as part of American Airlines, at least culturally," said technology vendor Richard Eastman of The Eastman Group. "Sabre is acquiring a bunch of corporate travel and airline clients who didn't want to do business with Sabre/AA. You can almost be assured that current GetThere users will seek alternative vendors."
TRX, which stands to benefit if GetThere is rolled into Sabre BTS's choice of TRX for low-cost online fulfillment (BTN, Jul 31), agreed.
"A window has opened up as an opportunity to jump in while there's this chaos, where you have companies trialing BTS and deciding to go out to bid," said Reynolds. "There are also quite a few companies smack in the middle of the bid process."
Still, BTS and GetThere are the two largest booking players among big accounts, now installed in either beta or full rollout at more than twice as many of the 100 largest corporate accounts than all of their competitors combined (see chart, above).
Among the 67 Corporate Travel 100 accounts that this summer told BTN they had selected a reservations system, GetThere works with 20. GetThere also provides technology to at least two of the 10 customers who named American Express as their vendor, since it backs Amex's new CTO product (BTN, June 12), which recently completed a pilot in select sites. GetThere also now supplies more than 1,000 smaller Amex clients with booking technology.
Elsewhere among the CT100, Sabre BTS supplies another 17 accounts, followed in order by Oracle E-Travel (7), TRX's ResAssist (4), Rosenbluth/Xtra On-Line (3), Worldspan TripManager (3) and three others with one each.
Though initial lines are indeed drawn, they are not immovable. About half of the 33 who did not name a vendor said they were planning to pick a system within the next year, including such huge accounts as AT&T, Computer Sciences Corp, DaimlerChrysler, IBM, Lockheed Martin and PricewaterhouseCoopers.
Others in that group of 33 have divisions that picked a system, which may or may not mean the parent company will retain that vendor. GetThere, for example, serves Blockbuster but not its parent Viacom, which has not selected a system. Another media conglomerate, TimeWarner, is in bid for a booking system while its Time Inc. publishing unit is using E-Travel and Turner Broadcasting is utilizing ResAssist.
Meanwhile, corporate clients have shown that despite initial investments, they are willing to switch vendors for a variety of reasons that may have little to do with the supplier. GetThere, for example, won over Liberty Mutual from Sabre BTS; BTS won the Assisted Living Concepts account after it dropped Xtra On-Line for internal reasons.
Though the number of corporate online bookings industrywide is relatively small, they are growing fast. Analysts and observers said the acquisition is a smart one for Sabre not just for the corporate business. The deal also positions Sabre well in the broader world of online travel among such competitors as Microsoft's Expedia and the airlines' forthcoming Orbitz and Hotwire sites.
According to Forrester Research travel analyst Henry Harteveldt, a former GetThere manager, "Sabre realized something very important: That they face eventual disintermediation by suppliers developing technology solutions that allow corporate accounts, consumers and offline/online travel agents to bypass the GDS."
"Sabre has found a way to remain in the loop," he said.
TravelTechnology.com's Rose called Sabre's move, "the evolution toward an XML gateway alternative platform. Sabre now gets a leg up on creating the next generation GDS, an XML gateway-driven Internet-based platform."
"It clearly fits Sabre's strategic initiatives to be the sole electronic distribution channel between the vendors of all travel product and the buyers," said Eastman. "GetThere already has most of the major airlines locked up with their Web booking engines. If you're going to have direct booking solutions and effectively compete with Orbitz, you need to buy what goes into systems that connect that inventory with airlines that run their own reservations host, and then you have to keep it."
GetThere powers Web sites for Air New Zealand, Alitalia, All Nippon Airways, America West, British Airways, Lauda Air, National, Northwest, the Star Alliance, TWA and United.
Eastman suggested that although it doesn't now say so, Orbitz wants a piece of the corporate market--all the more reason for Sabre to make this move.
"One of the Orbitz strategies is to be the low cost distribution channel in the e-commerce world, the Southwest of e-commerce," he said. "If you're that, you cannot be just leisure. And more critical is that I don't believe Orbitz can compete with a Travelocity or Expedia without a solid direct-access corporate base. The Orbitz solution offers the airlines the vehicle by which to bypass the high cost GDS/travel agency model, and big corporations want direct deals."
Wall Street liked the deal, although the GetThere shareholders who bought in at more than the $17.75 acquisition price are an unhappy vocal minority.
"It's a pretty attractive acquisition for Sabre," said Robert Milmore of Arnhold & Bleichroeder. "They're getting the business at a reasonable price. My target price on GetThere was $18, but you could argue that it was worth well more than that longer term. I'm a little surprised GetThere's management was looking to sell out at this time."
Salomon Smith Barney recently had set its target stock price for GetThere at $32--and many open market traders bought it at a far higher level than the $17 or so that they're getting for it now. GetThere's stock price even reached about $52 in December.
Answering to investors who lost out, Maier said, "For everyone who sold there's also someone who bought at lower price. We felt it was a very fair price, but that doesn't mean every shareholder is happy. If the stock was always on an upward trajectory, you'd find everyone is pleased."
"The minority shareholders don't really have a shot" at quashing the deal, said Milmore. "A large portion of the company is controlled by venture capitalists, insiders, United, Amex and GetThere management."
If more than 50 but less than 90 percent of shares are tendered, a shareholder meeting will be called; no meeting would be required if more than 90 percent of shares are tendered.
The only possible alternative now is that someone else comes in and makes a counterbid," added Milmore.
Another analyst said, "I don't know what it signals about what would have been the future of GetThere that they take an all-cash offer. Maybe they were this desperate? Were they keeping Oracle or IBM from getting it?"
Milmore, too, speculated that Oracle might use its stock as currency for a counter-offer, but an Oracle E-Travel spokesperson said, "We're not looking to make any kind of offer; we feel confident we can continue to have success."
Sabre's Hannigan said Sabre and GetThere had been in "serious discussions for a few weeks now." The announcement was intended for last Tuesday, but officials suspected a leak and announced it early to minimize legal risk. Indeed, trading volume on GetThere's stock increased tremendously on the Friday before the announcement.