DMCs & PCOs

Carlson Makes Mega Deals: Signs Pacts to Gain Control Of CWT, Acquire TQ3Navigant
09/05/2006
Carlson Companies late last week announced agreements to take a majority stake in Carlson Wagonlit Travel and buy rival travel management company Navigant International.
CWT'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.
At the same time, Carlson Wagonlit's 50 percent shareholder, Accor, is selling its stake 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. 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.
One Equity Partners is a private equity affiliate of JPMorgan Chase, managing $5 billion of its affiliate's investments and commitments in direct private equity transactions. Carlson Wagonlit said it has obtained "commitments" from JPMorgan Chase, as well as Lehman Brothers and Morgan Stanley, to finance the Navigant deal.
The CWT deals have significant implications for the global travel management market, which now is more consolidated than at any time in its history. There are four leading players, all of them wholly or majority-owned: American Express, Carlson Wagonlit, BCD Travel and HRG, plus a potential fifth force in the form of wholly owned FCm Travel Solutions.
In the United States, where HRG is a small player despite sizeable interests in almost all other key markets, the Navigant acquisition means greater polarization than ever between the big three and the rest of the field. According to 2004 ARC figures, BCD predecessor WorldTravel BTI processed 5.2 million transactions and the next largest was Omega World Travel with just over 1 million transactions. According to CWT president and CEO Hubert Joly's own estimates, CWT now has 7 percent marketshare in the United States, compared with 9 percent for Amex. Worldwide, he estimated that Amex has 10 percent marketshare and CWT 9 percent. However, Joly said: "Nothing in our strategy is focused on surpassing Amex in size."
The deals leave Carlson Wagonlit saddled with significant debt, but 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 OEP was "committed to four years in the business."