Skift Take
Behind the investor cravings as American Express Global Organization Travel prepares to go public.
Matthew Parsons
A number of travel and hospitality business are poised to make their stock exchange debuts later this year, with one in specific that might stump a great deal of individuals as it runs in the corporate travel sector– a sector that’s been devastated by the pandemic.
Yet American Express Global Business Travel, the world’s most significant business travel agency, could see its shares trading on the New York Stock Exchange in the very first half of this year, if a planned merger with its special function acquisition business (or SPAC) partner Apollo Strategic Development Capital proceeds.
Covid has actually eliminated revenue for most travel management companies because March 2020, and with Omicron spreading they aren’t out of the woods yet. Nor is the long-term future certain with the dispute around video conferencing changing large chunks of travel.
But investors are rallying round, despite the firm’s price quote it might only see travel volumes return to 70 percent compared to before the pandemic. CEO Paul Abbott has said he wished to damage a few of the most positive forecasts and create a floor for investors. It might have worked.
Getting On Board
At the tail end of last year what appears to be a new investor to travel, Carver Capital Management, took a 5.55 percent stake in Apollo Strategic Growth Capital. Carver generally concentrates on a variety of items across “multi-strategy, credit and real estate.”
If the handle Amex GBT does go ahead, Apollo Strategic Growth Capital’s public investors would own 15.4 percent of the post-combination company, which will be called Global Organization Travel Group, Inc. Carver would wind up owning simply under one percent of the new company, whose value is being put at $5.3 billion. While a reasonably little financial investment, it speaks volumes about how financier interest has been piqued by what some are stating a “recovery market.”
Apollo Strategic Development Capital does not comment on private investors, but its CEO, Sanjay Patel, told Skift he was a “big follower in the recovery of best-in-class franchises throughout travel, hospitality, video gaming and other Covid-impacted sectors.”
More financiers will likely follow, according to one professional.
“I believe it’s a good area to focus on,” stated one venture capital executive not connected with Apollo and who wanted to remain anonymous. “Now that we are getting in 2022, more financial investment companies are focused on the travel recovery and what those investment returns might be. The general agreement is that business travel will never go back to 2019 levels so any indication that travel healing is above the 70 percent forecasted by Amex GBT will reward financiers handsomely.”
Another specialist said many financiers now related to travel as a healing play, and believe there’s an advantage.
“And it’s intriguing they’re picking intermediaries, rather than airlines. Say there’s a 10 percent advantage to the base case, the benefit might be quite delicious,” said Martin Warner, principal at MW Travel Consultancy.
What makes the Amex GBT deal special (in the meantime, a minimum of) is that other travel companies are investing, which reveals a renewed faith in the firm design, regardless of airline companies and some other providers seeking to connect more directly with business travel buyers.
Travel technology giant Sabre, for example, is also purchasing Amex GBT as part of the deal. It’s perhaps no coincidence that Kurt Ekert, former president and CEO of service travel management business CWT, became its president on Monday.
Its equity grab offers Amex GBT some much required cash, as the merger might generate $897 million in gross proceeds for the travel bureau, and adequate funds to obtain other companies. But for Warner, it’s also representative of a supplier offer. “It lends itself to Amex GBT trying to safeguard the tradition global circulation business,” he stated. “The airline companies shifted a lot to have new commercials with the worldwide distribution business, under the guise of New Circulation Ability material, but it’s really a change of commercial arrangements.”
Sabre’s investment might likewise unlock for other agencies, such as CWT or BCD Travel, to rely on Amadeus or Travelport and request similar financial investment.
Will It Last?
Amidst the dealmaking, some alert that the SPAC frenzy may be short lived. As far back as May in 2015, one investor stated the scene had ended up being crowded. “A lot in the pipeline will probably pull back,” stated Carl Sheperd at the Skift Live Short-Term Rental and Outdoor Summit. “There’s numerous billions tied up going after unicorns. They’re called that for a reason. With that much money chasing so couple of chances, you realize it may not be the best time.”
Amex GBT is just one of several offers waiting in the wings, together with Sonder; other SPACS, also called blank check companies, exist to merge with companies and take them public, and Altimeter Development Corp 2, Altitude Acquisition Corp, Accor Acquisition Co and Go Acquisition Corp have yet to find new houses, with the latter in the media recently due to a dispute over whether SPACs need to deal with more regulative controls.
Meanwhile, a report in September 2021 highlighted how financiers were pulling their cash out of SPACS at increasingly greater rates. But for now the corporate travel sector is enjoying its time in the spotlight as it evolves for the post-pandemic landscape.