Though many expected a mega travel management
company merger of Marriott/Starwood proportions, it still caught the industry by surprise when,
on Feb. 9, American Express Global Business Travel
and Hogg Robinson Group announced HRG had accepted a bid from Amex GBT for 410 million British pounds, or about $570 million. The implications:
Clients likely will be up for grabs, more TMC consolidation could follow and New Distribution Capability momentum could be interrupted.
Although the business travel industry’s usually hyperactive bush telegraph failed to get wind of the deal
before the announcement—Amex GBT submitted its
offer on Sept. 7, 2017—a transaction between the
two had looked a distinct possibility ever since Amex
GBT formed in July 2014 as a joint venture between
American Express and Certares. With a huge war
chest, the only significant acquisition Amex GBT has
made until now was online booking and expense tool
provider KDS (see page 4). A big buy, most likely
of another top TMC, had seemed likely to fulfill the
JV’s strategic intentions, and Hogg Robinson looked
the most likely acquisition target, as its revenue has
fallen for several years while profit and share price
growth have been limited.
The timing also seems good for HRG considering some recent client movement. Disney switched
from HRG to Amex GBT, according to an industry
source. Then, in December, Disney bought 21st Century Fox, one of HRG’s few remaining U.S. clients.
According to BTN’s 2017 Corporate Travel 100, the
only other CT 100 company for which a consolidated
U.S. or global TMC was listed for 2016 was Wells
Fargo. Roche used BCD Travel in the U.S. and HRG
outside the U.S. in 2016, and Novartis switched its
global TMC services from HRG to Carlson Wagonlit
Travel midway through the year.
The Amex GBT/HRG deal is scheduled to close
this month and take effect in the second quarter,
though HRG shareholders and authorities in the
U.S., European Union and other jurisdictions will
need to OK it. Hogg directors have vowed to sell
their 1.33 percent stake, as has Boron, which holds
23.87 percent, and Dnata, which owns 21. 8 percent.
Those add up to 47 percent of the 75 percent needed
to approve the deal.
Hogg Robinson already had been in talks to sell its
expense management software-as-a-service business,
Fraedom, to Visa for 141.8 million British pounds,
and that deal is scheduled to close March 12. If Fraedom is disposed of first, Amex GBT will pay 120
pence per share for HRG. If the chronology switches,
HRG’s price reduces to 110 pence per share, or 376
million British pounds.
There is no word on what the combined Amex
GBT/HRG will be called or how it will be run, but
the likelihood must now be that the Hogg Robinson
Group name, which traces its origins to the 1840s,
will disappear. According to the offer document,
headcount will be reduced by between 6 percent
and 8 percent—particularly in corporate, service
delivery, commercial, IT and meetings, groups and
events—across both Amex GBT and HRG. Each
TMC currently employs 12,000 people.
What It Means for Travel Buyers
Mergers always prompt some clients to jump ship.
A competitor distracted by a huge integration effort
could be good for BCD Travel, said president and
CEO John Snyder, and could open new client opportunities. “When big deals like this happen, a lot of
big customers sit back and evaluate their provider,
and this is likely to spur some bid activity.” At the
same time, Amex GBT will fight hard to retain clients, said GoldSpring Consulting partner Will Tate.
For larger, multinational, mature programs, which
largely are consolidated under one of the megas, one
out of four of their options is gone. That means 20
percent to 25 percent of the competitive landscape
in the market has gone away, he said. Partnership
Travel Consulting chairman and CEO Andy Menkes advised smaller travel buyers going out to bid
to look elsewhere. For those companies, there are
plenty of alternatives, Tate said, so the merger won’t
be a big shock wave.
Meanwhile, there’s a chance of further TMC consolidation to fill the hole where HRG once stood.
HRG and Amex GBT’s sales combined to $48.1
billion in 2016, according to Travel Week’s 2017
Power List. That’s almost twice BCD Travel’s $24.6
billion and more than twice CWT’s $22.4 billion.
Flight Centre Travel Group, which includes FCM
Travel Solutions, is the next agency on the list that
has a corporate component, with $14.4 billion in
2016 sales. That TMC now stands alone in the sales
volume space it once shared with HRG.
TMCs that could acquire to reach that volume
are those on the Power List that had sales above
$1 billion: Travel Leaders Group, Corporate Travel
Management, Travel and Transport, Altour, Direct
Travel, Frosch, Omega World Travel, World Travel
and Ovation Travel Group.
These TMCs also are strong candidates to pick up
clients from the bottom of the CT 100, as well as
slightly smaller programs—those that require maybe 10 to 20 countries to be integrated rather than 40
to 50, Tate said.
Then There’s the Technology
The merger would throw a speed bump in front of
New Distribution Capability, Menkes said. Amex
GBT has shied away from it while HRG has chased
NDC-enabled capabilities. HRG folks can provide
perspective on why the company embraced NDC,
Menkes said, but it doesn’t mean Amex GBT will
change its strategy. An industry source told BTN
that HRG derives 75 percent of its revenue from
sources other than global distribution system incentives and commissions and Amex GBT is the opposite, so Amex GBT likely will continue to avoid any
NDC strategy that bypasses GDSs.
Meanwhile, the $900 million with which Amex
GBT was seeded in 2014 has fueled interesting
tech development, Tate said, and there’s value in
being able to distribute those innovations to the
Amex GBT has
shied away from
while HRG has
chased them. GBT’s
likely will win out,
throwing a speed
bump in front of of
Amex GBT & HRG’s
BY AMON COHEN & AMANDA METCALF