EC continues probe into Travelport-Worldspan deal


The European Commission opened an in-depth inquiry May 3 and gave itself another three months to probe Travelport's proposed $1.4 billion acquisition of Worldspan after the EC's initial investigation "identified serious concerns" that the merger "might lead to significant impediments to competition" in Europe.

In contrast, the next day the EC gave its relatively swift blessing to MyTravel Group's merger with KarstadtQuelle, the department store and mail order entity that owns Thomas Cook Group.

In its now-concluded initial investigation of the Travelport-Worldspan deal, according to the EC, the pending merger appears like it would lead to "competition concerns" for suppliers in Europe and for travel agents in the U.K., Ireland, Italy, Belgium, the Netherlands and Hungary.

A combined Worldspan-Galileo would be the second largest GDS firm in Europe, as Galileo is on its own now, and would have market shares ranging from 40% to more than 70% in those six European countries, the EC stated. Amadeus is first, Sabre third and Worldspan fourth in Europe marketshare.

"In its in-depth investigation, the commission will assess the effects of the reduction of the number of GDSs from four to three and the elimination of competition between Galileo and Worldspan on competition in the European Economic Area, and in particular whether prices for GDS services to travel service providers would increase," the EC said.

The commission stated that it would conclude this second phase of its investigation of the merger by Sept. 13.

Travelport spokesman Elliot Bloom told that both companies still expect the deal to close in third-quarter 2007, after regulatory approval.

Asked whether the merger agreement allows Worldspan to entertain other bids in the interim, Bloom said: "No, Worldspan cannot merge with another company."

In a statement, Travelport said: "Alternative distribution channels, such as supplier Web sites and other direct channels, have expanded considerably in recent years and exert strong competitive pressures on GDSs such as Galileo. The contemplated merger of Worldspan into Galileo, a subsidiary of Travelport, will establish a more effective and efficient travel distribution provider as the combined company will promote technology innovation and compete more effectively in an increasingly competitive market driven by demands for lower prices."

Michelle Grant, a research analyst for Euromonitor International in Chicago, said she doesn't think the EC's action is a "major threat" to the deal's closing.

Grant said Worldspan and Travelport can present a strong case that the rise of supplier-direct channels and low-cost carriers have put stronger competitive strains on the GDSs.

She added that the EC's decision to undertake a deeper investigation "might reflect its unfamiliarity in how the landscape has changed."

Meanwhile, regarding Thomas Cook's pending acquisition of MyTravel, the EC found that the merger "would not significantly impede effective competition" in Europe.

The commission noted that the combined company would continue to face competition from TUI and First Choice, and many smaller tour operators.

The commission said it would also rule on the proposed TUI merger with First Choice by May 16.

To contact reporter Dennis Schaal, send e-mail to [email protected].


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