How the deal went down
Carlson Cos. has to complete its business with Accor before Carlson Wagonlit Travel buys Navigant, but that is not how this play started.
Marilyn Carlson Nelson, the company's chairman and CEO, said she first met Navigant's chairman and CEO, Ed Adams, two or three years ago.
It was a three-way meeting involving Mike Batt, Carlson Leisure Group president, and the purpose was to see if Navigant had any interest in collaborating.
"That business model was a little different [from ours], and nothing came of it," Nelson said.
Carlson Cos., this time through the Carlson Wagonlit Travel operation, began looking at Navigant again, she said, when CWT President and CEO Hubert Joly wanted to find ways to strengthen CWT's presence in the U.S.
Acquisition is faster than organic growth, and the company had already proven its "competency at integration," Carlson Nelson said.
She said the CWT board had several ideas for boosting the travel management company's profile here but concluded that acquisition was indeed the best route and authorized Joly to approach Adams.
After CWT moved down that road, Nelson said, "then Accor took a different direction" because it wanted to focus on growing its hotel business. As a result, "the size of this acquisition felt off focus for them," Nelson said.
Hence, the chain of events that now seems certain to end with a Carlson Wagonlit Travel purchase of Navigant got longer. -- N.G.
In a pair of bold moves that could
significantly alter the industry landscape, Carlson Cos. announced
last week that it would acquire controlling interest of Carlson
Wagonlit Travel, which in turn will buy corporate travel management
giant Navigant International.
CWT said it would
purchase all outstanding shares of Denver-based Navigant for $16.50
per share in cash. The transaction, valued at $510 million,
including assumption of debt, would double the agency's North
American air bookings to $8 billion and bring its annual sales to
$26 billion, based on 2005 results for CWT and its various joint
ventures.
Before that deal
closes, Carlson Cos. and One Equity Partners, a private equity
affiliate of JPMorgan Chase & Co., will pay $465 million for
the 50% share of CWT currently owned by Paris-based
Accor.
Under the new
partnership arrangement, Carlson Cos. will hold a majority stake in
CWT, at 55%; One Equity will hold the other 45%.
Because the Accor
deal must close first, CWT's acquisition of Navigant will not be
completed until sometime in the second half of the year.
Both deals depend
on regulatory approval. The Accor deal must be signed off on by the
European Union, the U.S. Justice Department and several other
countries' oversight agencies. That process is expected to take 30
to 90 days, said Jerry Hogan, CWT's general counsel.
Ed Adams,
Navigant's chairman and CEO, said Justice also would also examine
the CWT-Navigant deal "from the standpoint of antitrust," but
added, "that shouldn't be an issue, in my view."
The Navigant sale
must also be approved by Navigant's
shareholders. That approval is highly likely because the sale price
represents a 25% premium over the shares' trading price at the
April 26 close of the Nasdaq and a 38% premium over the average
60-day price.
Carlson Cos.
chairman and CEO, Marilyn Carlson Nelson, said she "would be
amazed" if the shareholders turned down the offer.
In all,
shareholders will be paid about $276 million. The remainder of the
$510 million value represents the assumption of Navigant's debt,
which stood at about $220 million at the close of fiscal year
2005.
Hubert Joly, who
will continue as president and CEO of the Carlson travel management
company and remain based in Paris, noted that after the
acquisition, the U.S. market would remain fragmented, with the top
five players in business travel management still accounting for
only 25% of the total.
As for CWT
itself, besides significantly boosting its U.S. presence, Joly said
the Navigant purchase would "give us a more balanced mix of
customers," particularly by adding a larger customer base in the
midmarket. Given Navigant's operations in Australia and New
Zealand, he added, the deal would "also balance revenue from a
geographical standpoint."
The acquisition
of Navigant would seem to give CWT the top spot on Travel Weekly's
annual Power List. Based on 2005 results submitted for the 2006
list, CWT's volume ($16.5 billion from wholly owned locations only)
and Navigant's volume ($6.5 billion) come to $23 billion, topping
American Express' total of $18.8 billion in sales.
Charles
Petruccelli, president, global travel services at American Express,
said the CWT move demonstrates "the strength and buoyancy of the
travel management industry."
He said American
Express knows the "real costs and effort" associated with
integrating company cultures and businesses; he was no doubt
alluding at least in part to its purchase of Rosenbluth
International in 2003. However, he said, American Express is now at
a point where "we do not now see the need to undertake a major
acquisition."
Joly, meanwhile,
said, "size is not the goal in and of itself. ... I don't wake up
at night worrying about how we are doing vis-a-vis American
Express."
Noting that CWT
has managed seven integrations, including Maritz, in the last two
years, Joly said, "We will take our time" to provide "a seamless
and careful transition for clients."
Adams will leave
the company after assisting with the transition.
Navigant's CFO
and COO, Bob Griffith, will become CWT's executive vice
president.
Adams said "most
if not all" of his senior team would stay, but "there will be some
departures, and integration teams will look at this
thoughtfully."
The Navigant name
will go away.
To contact the reporter who wrote this
article, send e-mail to Nadine Godwin at [email protected].