Online travel group Webjet is making its second big offshore move in 18 months.
It revealed yesterday it plans to spend $240 million to buy the Dubai-based business-to-business travel business Destinations of the World (DOTW).
Webjet is asking investors for $153 million through a nine-for-one entitlement offer at $12.77 a share to pay for the acquisition, which it will top up with $102 million in debt and give $28 million worth of new Webjet shares to DOTW’s current owners.
Up to a further $US25 million ($A35 million) based on performance could be payable by the second half of the 2020 year.
Trading in Webjet shares was halted at Friday’s close of $12.91.
In August of last year, Webjet said it would buy the UK-based JacTravel, which wholesales hotel rooms and group tours, for £200 million ($A332 million) to expand its existing WebBeds wholesale business.
Webjet is paying for DOTW in a similar fashion to the structure of the payment for Jack Travel. That saw Webjet issue $164 million worth of new shares to fund the acquisition to existing shareholders in an entitlement issue (one for six), pay a further $145 million in cash and and issue about $30 million of new shares to JacTravel’s management shareholders and its private equity owner as part of the transaction.
The impact of that deal has been seen in the improvement in Webjet’s earnings.
Webjet on Monday gave underlying earnings guidance from its existing business for “at least” $110 million the 2018-19 financial year, up 25% from $87.4 million last year which contained only part of a year’s contribution from JacTravel.
“In addition, based on the current AUD/USD exchange rate (around 71 US cents), Webjet expects pro-forma EBITDA for the DOTW business for the year to 30 June 2019 to be at least A$23 million.
“Assuming an acquisition close of 22 November 2018 and having regard to seasonality in that business reflecting the timing of the Northern Hemisphere summer holiday period and corresponding weighting of bookings to 1H19, Webjet expects DOTW to contribute incremental EBITDA of at least A$10 million for the year to June 2019, pre-synergies.
“Webjet, therefore, expects total FY19 EBITDA to be at least A$120 million, comprising EBITDA from the existing businesses as well as the 7-month contribution from DOTW, pre-synergies,” the company forecast yesterday.
Linking hotels with travel agents, DOTW operates in the Middle East, Europe, the Asia Pacific and the Americas, and Webjet says it will compliment its own WebBeds business.
The sale price represents 10.5 times DOTW’s earnings. Webjet said there would be about $14 million in synergies realised between the two companies and would be “mid-single digits” earnings per share accretive this financial year.
“The acquisition of DOTW continues to consolidate WebBeds’ position as the clear [number two] player in the global B2B market,” Webjet managing director John Guscic said in yesterday’s statement.
