By Dow Jones Business News, September 25, 2013, 03:00:00 PM EDT
(Updates with details throughout)
By Saabira Chaudhuri
American Express Co. ( AXP ) on Wednesday unveiled plans to form a joint venture for its corporate-travel business with
an investor group led by Certares International Bank LLC, after American Express earlier this year cut jobs at its
Under the proposed deal, American Express would maintain a 50% ownership stake in the joint venture, which would
continue to operate under the American Express Global Business Travel brand. The investor group, which would own the
remaining 50%, would invest between $700 million and $1 billion in the business.
The deal is expected to close by the second quarter of next year. American Express will recognize a gain at that time.
New-York based Certares is led by Michael Gregory O'Hara, who previously served as a board director for Carlson
Wagonlit Travel and Travelport, and as the chief investment officer of J.P. Morgan Chase & Co.'s ( JPM ) special
Responding to the rise of do-it-yourself policies that ask employees to book work trips online rather than calling an
AmEx travel agent, American Express in January revealed it was making moves that would result in the loss of 5,400 jobs.
Those cuts have been part of American Express's push to develop more technology-based services that can handle bookings
and other travel arrangements quickly and cheaply.
Following the job cuts earlier this year, which were aimed at ramping up efficiency, Group President of Global
Corporate Services Stephen J. Squeri said the joint venture is the next phase of American Express's push to grow its
travel business through additional investments that will allow the company to expand its offerings.
In an interview, Mr. Squeri said the investment will allow American Express to expand its international business,
offer its customers mobile tools, and have one technology worldwide for all its travel counselors and customers.
He noted that the deal will also help the company expand its core corporate payments business, since this is strongly
linked with its travel business.
Mr. Squeri also said American Express decided a joint venture was the way to go since "otherwise we would have to make
a choice between growing our credit card business or growing our travel business."
Sameer Gokhale of Janney said the partial sale of the travel division came about because American Express couldn't
justify significant investments in that business since its proprietary card and Global Network Services businesses "
generate substantially higher margins and returns and have better growth prospects compared to the travel business."
He characterized the deal as a "smart move for American Express as it would allow the company to retain the strategic
benefits of the corporate travel business while enabling it to generate better financial performance with a venture
American Express's consumer travel business, which provides card members and other consumers with travel benefits and
services, isn't part of the proposed deal. UBS AG ( UBS ) was an advisor on the deal.
Earlier this month American Express agreed to sell five of its publications, including Travel + Leisure and Food &
Wine, to Time Warner Inc. (TWX). The magazine publishing unit was a small business for American Express but may have
posed regulatory issues.
The credit card company became a bank holding company at the height of the financial crisis, in a move aimed at making
it eligible for low-cost financing from the Federal Reserve.
Regulators discourage licensed banks from participating in nonfinancial businesses. However a spokesperson for
American Express noted that regulations allow for financial services companies to own travel agencies and that
regulatory considerations weren't a driver behind the joint venture.
American Express shares were recently down 0.4%.
--Andrew R. Johnson contributed to this article.
-Write to Saabira Chaudhuri at email@example.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
Copyright (c) 2013 Dow Jones & Company, Inc.