A historic event took place on the
other side of the pond over the summer, and the exclamation point
should come next month. The event? Amadeus airline owners -- Air
France, Iberia and Lufthansa -- completed a $5.4 billion deal with
two European buyout firms and relinquished their control of the
company.
So, for the first
time since airlines began creating GDS companies, Amadeus, Sabre,
Worldspan and Galileo are not controlled by airlines. Unlike the
other GDSs, however, airlines still hold a substantial minority
stake in Amadeus.
The three airlines
deal to take Amadeus private and to cede majority ownership to a
company created by BC Partners and Cinven essentially is complete,
although Amadeus stock has not yet been delisted.
When the process is
complete and the stock is delisted -- probably in October --
Amadeus will be a private company controlled by Amadelux
Investments, an entity owned 50-50 by BC Partners and
Cinven.
The airlines release
of control over GDS businesses has been under way since 2000, when
American spun off the remainder of its holdings in Sabre. As for
Amadeus, reporters (myself included) have spent careers speculating
about acquisitions, mergers and other marriages involving the
Madrid-based technology company.
So, now that an
Amadeus transaction actually has taken place, what is its
significance?
Well, the buyout was
certainly a way for Air France, Iberia and Lufthansa to make a
bunch of euros fast. BC Partners and Cinven are hoping to do
likewise, of course, after holding the company a few years to get a
big return on investment, as is the wont of leveraged buyout
firms.
And, for Amadeus,
where no wholesale management housecleaning is expected, the
company is expected to continue with its current strategic bent as
a supplier of information technology and airline solutions around
the globe.
So, lets recap a
bit.
The two buyout firms
paid stockholders 7.35 euros (about $9.11) per Class A share -- a
premium of about 49.4% on Aug. 17, when the stock closed at 4.92
euros (about $6.10). Air France said the transaction brought it
about $1 billion in cash and a capital gain of some $705 million in
the second quarter.
Air France, the
third-largest airline in terms of international passengers,
maintained its 23.3% stake in Amadeus.
Iberia cashed in, as
well, reducing its minority ownership in Amadeus from 18.3% to
11.7%. Lufthansa, meanwhile, increased its equity in Amadeus from
about 5% to 11.7%, matching Iberias.
So, with the
transaction complete, Amadelux Investments has a 53.3% majority
stake in Amadeus and voting control, and the three airlines own
about 46.7%. Previously, the airlines also owned 46.7% of Class A
shares, but wielded about 85% of the voting rights.
Amadeus, the largest
GDS company in terms of revenue, bookings and locations, is
expected to continue its tilt toward the IT and e-commerce
businesses.
In that regard, the
16-member Star Alliance and Amadeus announced a deal last week in
which Amadeus will create a common technology platform for the
alliance, weaning members passenger service systems off legacy
technologies.
Lufthansa and United
are the first in line to move to the new platform, which would
accommodate schedules, availability, inventory, reservations, fare
quotes and ticketing, the Star Alliance said. Lufthansa is
scheduled to begin implementation in the second half of 2006, while
the timing of Uniteds migration has not been
established.
Amadeus is big in the
airline IT business, with its Amadeus Altea IT solutions product
being used by 150 airlines for reservations and 25 for inventory
management. And, Amadeus IT business is growing much faster than
its agency distribution business, a trend that is expected to
continue under the new owners.
In the second
quarter, Amadeus non-booking-related revenue [which takes in much
of its IT/airline business], increased 33.1% to some $422 million.
During the same period, its revenue related to booking fees, a much
larger business, increased 10.8% to $1.1 billion.
Meanwhile, with its
part ownership of online travel agency Opodo, Amadeus will
emphasize e-commerce, as well. In the second quarter, Amadeus
e-commerce bookings grew 41.5% to 15.4 million. Traditional
bookings jumped 7.3% to 100.1 million.
With the long-awaited
buyout finally done, this leaves us scribes with the job of
speculating about the next GDS marriage. So, Worldspan, any
suitors?