NEW YORK -- American Express agreed to purchase Philadelphia-based
Rosenbluth International, a move that will combine the No. 1 and
No. 5 U.S. travel agencies for a total global sales volume of about
$20 billion. Terms of the pact were not released.
The deal is expected to close in the next few months, pending
regulatory approvals in the U.S. and Germany, said Ed Gilligan,
group president for American Express Global Corporate Services.
After that, the Rosenbluth name will disappear from this arena;
however, a separate company, Rosenbluth Vacations, continues in
business and is not part of this sale.
Hal Rosenbluth, chairman and CEO of Rosenbluth International,
said he will be deeply involved in facilitating a smooth
integration of the two businesses, focused on ensuring client and
staff satisfaction, and he will "share insights" with American
Express.
He said he will "stay for the period of time that is needed,"
and at some point he will "ride toward the sunset," referring, more
precisely, to his much-loved ranch in North Dakota.
Company president Alex Wasilov said he will focus on the
integration, client retention and "building our new solutions." As
to his future in the merged business, he said, "We are a long way
from determining how that plays out for me."
When asked if the acquisition will lead to staff layoffs,
Charles Petruccelli, president of global travel services at
American Express, said he couldn't guarantee jobs, but "both
companies are focused on the customer, and we still need people to
do that." Rosenbluth said there could be staff adds during the
transition because both firms keep winning new accounts.
Petruccelli said the corporate cultures at the two firms are
"very similar," due to their strong focus on their customers and
employees, and he said he "looks forward to a smooth
transition."
Rosenbluth's path
Rosenbluth said he saw a future in which customers would want
"more and more" services and more cost savings.
As a result, he said, he concluded the travel agency business
needed more consolidation, and he wanted to be in the forefront of
that process.
He spent the last two or three years seeking a solution, he
said, first by shopping for agencies to buy, but wound up walking
away from some deals. Given an ownership structure involving five
members of an extended family, the kind of major buys that he had
to make "wouldn't happen."
Therefore, "sticking with my belief about what is right for the
agency and the industry," he said, "I then looked for the right
company to combine with. ... We've been very successful, so we
could select whom we wanted."
American Express, he concluded, was the best match because it
had the "best platform for our people and [ability] to implement an
integration" and because it was the only global player with a
single ownership. Wasilov said the agency talked to "multiple
organizations" about a possible deal, but he would not reveal
details except to note that not all were U.S.-based.
Rosenbluth said the decision to sell a family business was an
emotional one, not so much because the name will disappear but
because, among his associates at the business, we are "a company of
friends." But, he said, "I chose right over love."
His children, therefore, won't inherit this particular business
or the option to take it over. That's a good thing, according to
Rosenbluth. "I was never a fan of nepotism," he said. "It's not
right for others if family members are [automatically] chosen for
jobs. It is the most demoralizing thing" for the rest of the
staff.
The Rosenbluth business has been handed down from generation to
generation for more than 100 years, but when Hal and his forebears
came to the business, it was a much smaller operation without much
of a corporate ladder.
American Express' view
Petruccelli said, "Adding Rosenbluth talent and resources helps
us to find new ways to serve clients [while being] more efficient,
and it keeps the business strong and vibrant."
Rosenbluth brings 2,000 corporate accounts worldwide to the
table, and American Express sees that as an expanded opportunity to
market its corporate card and its corporate purchasing card, a
separate product created about a decade ago to enable companies to
pay everyday expenses and generate spending data.
Expanding business for the American Express cards was one of
several reasons for the purchase but "not the prime motivator," a
spokeswoman said.
Another important factor was the chance to extend American
Express' global reach. The sale encompasses offices in 15
countries; in addition to the U.S., they are Australia, Belgium,
Canada, China (Hong Kong), France, Germany, Ireland, Japan,
Netherlands, Russia, Singapore, Sweden, Switzerland and the
U.K.
While American Express already has locations in these markets,
the spokeswoman said, the mega-agency picks up the Rosenbluth
service capabilities and has the "opportunity to keep these clients
and interest them in other services."
And, in this arena, as in all others, American Express looks for
economies of scale and "a greater ability to deliver processing and
purchasing savings" to customers.
As for technology, both American Express and Rosenbluth have
been noted for their proprietary systems. Gilligan said American
Express will adopt the best of each or combine some systems when
that works best and "use this as an opportunity to set the bar
higher for our own company."
What's involved
American Express is buying all shares of the Rosenbluth
corporate travel agency in 15 countries. It also will buy Eclipse
Advisors, a subsidiary that provides procurement solutions to
corporations, travel suppliers and other agencies.
However, it excludes Rosenbluth's eight overseas joint venture
travel companies and Up/Stream, the subsidiary that provides
fulfillment services for Orbitz, Travelocity and others. The next
step for the joint ventures will vary by location, Wasilov said,
but the bottom line is they'll be spun off from Rosenbluth.
Up/Stream will continue under current management, led by CEO
Jerry Johnson, and will continue to be owned by the Rosenbluth
International shareholders but won't take the family name.