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Flight Centre Aims to Expand into Youth Travel Sector

Flight Centre Aims to Expand into Youth Travel Sector
Dec 16, 2015 By Simon Herrmann Tags: FLT

Flight Centre Travel Group (ASX:FLT) announced that it seeks to acquire Travelonomy Limited’s to boost its online presence in the student and youth travel sectors.

The Flight Centre Group has made an offer to acquire the unlisted US-based group of companies (SU), which is a subsidiary of Travelonomy Limited. Travelonomy is an Irish-based incorporated holding company. Through this acquisition, Flight Centre sees a major opportunity to boost its presence in the student and youth travel sectors.

Under the terms of the offer, Flight Centre will pay $US28 million to Travelonomy for complete ownership of SU. To complete this acquisition, Flight Centre requires 90% of Travelonomy’s shareholders to accept the offer within the next 17 days. SU is expected to generate more than $US250 million in Total Transaction Value (TTV) during CY15. After the acquisition, the existing SU management team will continue to run the operations.

According to Flight Centre, SU offers a strong technology platform and demographic exclusive deals that include specially negotiated student airfares and experiences via its website and mobile apps. This acquisition is expected to boost Flight Centre’s youth-focused businesses, which include the Student Flights leisure brand, tour operator Top Deck and the social networking website.

Mr. Graham Turner, the managing director of Flight Centre, showed confidence for the acquisition: “This presents a unique opportunity to secure a profitable travel technology company with proven e-commerce solutions and a highly experienced and talented leadership team that has built a strong bran presence. SU is now a market leader in a rapidly growing sector, which is estimated to be worth in excess of $US180 billion annually, and we see solid future growth potential for it, both within its existing markets and globally.”

Mr. Turner also mentioned that the company is currently working with the major low cost carriers in Australia to make their products available on from early CY 2016.

Flight Centre also stated potential short to medium-term benefits from this acquisition. The company expects its attachment and accommodation sales to increase, and also anticipates that it will achieve cost savings through consolidation of expenditure in some areas of the USA. Flight Centre also aims to fast-track SU’s growth in the UK by establishing close ties with its existing UK businesses.

Flight Centre will use company cash to fund the acquisition, which is expected to be accretive to the company’s earnings during the coming year.

FLT last traded at $34.40 as at 10:04 AM and is up 5.5% for the year.

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Simon Herrmann Author: Simon Herrmann Dec 16, 2015

Simon is a financial analyst at independent research firm Wise-owl who wants to change the world by disrupting the cliché approach to investment decision making with convergent thinking. Wise-owl’s goal is plain and simple: Find the best opportunities for our members by following a proven methodology and to create long-term value through high-quality advice, innovation, technology and education. We combine industry experience and the agile mentality of a start-up. Wise-owl is the future of stock market investing.

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