EU set to clear Travelport buy of Worldspan - sources
07.31.07, 6:08 AM ET
BRUSSELS (Thomson Financial) - The European Commission is set to clear online travel planner Travelport Ltd's proposed 1.4 bln usd acquisition of travel reservations systems operator Worldspan LP, sources told Thomson Financial News.
'It makes sense that this merger will be cleared. We are well into the phase two investigation and the (90 day inquiry) runs out (in) September,' a source said.
'What has been said publicly is that the merged entity will be the second largest player, and this was an obvious case for concern. But looking at the companies with the leading shares in the market, this is not an obvious 'gap case' (that would hinder competition),' the source added.
Another source added: 'The commission is getting its head around the industry and is less concerned with it than it was five years ago. The travel industry used to be characterised by collective dominance but there has been a change.'
'So few people use travel agencies that ultimately, given the direction of the industry and technology, the climate for approving this type of merger would be fine'.
The sources added that the presence of Europe's market leader, Spain-based Amadeus IT Group SA, in the sector, would be a factor for the commission giving the Travelport/Worldspan combination the green light.
'Amadeus is another factor why it will be cleared, of course. Travel suppliers, particularly airlines, are powerful companies themselves and it seems that they are increasingly trying to direct supply so that they don't have to rely on global distribution system (GDS) providers, ' the first source said.
'Also there are a lot of new entrants so there are other ways to get around GDS providers if needed'.
The second source said: 'Amadeus is quite a competitive tool. It is recognised as such -- there is no doubt about that.'
In early May, the commission said its initial market investigation found that the deal would give rise to competition concerns over the market for the provision of GDS services to travel service providers (airlines, car rental companies, hotels, etc) in the European Economic Area and to travel agents in several member states.
'In the markets for the provision of GDS services for travel agencies, the parties would have combined market shares ranging from 40 pct to over 70 pct in Belgium, Hungary, Ireland, Italy, The Netherlands and the UK,' it said.
'In the market for the provision of GDS services to travel service providers, the merged entity would remain the second largest GDS (behind Amadeus)'.
The EU executive has a deadline of Sept 13 to rule on its in-depth investigation. It declined to comment. On July 10, the US Federal Trade Commission gave its backing to the deal.
Travelport, a unit of California-based Blackstone Group (nyse: BX - news - people ) LP, is one of the world's largest travel conglomerates, operating brands such as Galileo, Orbitz and Gulliver's Travel Associates.
Worldspan, also owned by private equity, focuses on technology services for travel suppliers, travel agencies, e-commerce sites and companies worldwide.
The combination comes in a climate of extensive consolidation in the travel services industry.
At the end of last year, private equity groups Silver Lake Partners and Texas Pacific Group acquired travel-reservations system operator Sabre Holdings, parent of the online service Travelocity.com, for about 4.5 bln usd.
The groups will pay 32.75 usd per share in cash for the company, which connects airline, hotel and car-rental systems with travel agents. They also assume about 550 mln usd in debt.
Last year, Sabre bought European travel Web site lastminute.com for 1.1 bln usd.
Spain's Amadeus was sold to private-equity firms last year. It controls most of European travel portal Opodo, which in turn bought Karavel, a French Internet travel agency.
The companies host websites for consumers making travel plans. Airlines and hotels pay the sites for each referred traveller.
However, Sabre and its rivals have faced increased pressure in recent years with Internet sites providing alterative sources of travel information and flight booking systems.
Financially strapped airlines cut their fees by allowing consumers to buy directly from their websites, so bypassing major reservation services.
The increased competition has resulted pro-active acquisition strategies within the market.
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