Flight Centre Travel Group (ASX:FLT) announced that it seeks to acquire Travelonomy Limited’s StudentUniverse.com 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 StudentUniverse.com 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 gapyear.com 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 flightcentre.com.au 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.
Author: Simon Herrmann
Dec 16, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.