American Express Co.
) (AmEx) officially announced the sale of 50% of its Global
Business Travel (GBT) division through a joint venture (JV) with
an investors' consortium - Certares, led by New York-based
Certares International Bank LLC.
Accordingly, AmEx will retain 50% stake in the JV, while the
group from Certares will hold the remaining 50% share for a deal
value of $900 million. In September last year, AmEx had mentioned
its interest in spinning off 50% of GBT for a price in the range
of $700 million to $1.0 billion.
With over 14,000 employees, GBT embraces a wide scale of
operations with its business spanning across more than 138
countries. On the other hand, Certares enjoys expertise in the
global travel industry, led by a veteran chief investment officer
JPMorgan Chase & Co.
) and Lazard Ltd. as its lead advisor, while
Credit Suisse AG
) is advising Certares. Pending regulatory approvals, this JV
deal is scheduled to culminate by Jun 2014, following which AmEx
is also projected to realize gains from the transaction.
Rationale for the JV Deal
The decision is also backed by the company's intention to
revamp its corporate travel card operations. However, the
consumer-travel operations of AmEx is not included in the deal.
We believe the aforementioned business restructuring will help
AmEx consolidate its overall business and enhance its operational
This is due to the fact that the company has been facing
intense pricing and competitive challenges in this travel
business, given the influx of several low-cost online travel
agencies and other digital services in the industry. Higher costs
and operating limitations also resulted in a 2.9% decline in
travel commissions and fees since 2011 to $1.9 billion in 2013.
Likewise, the company had to slash its headcount, primarily in
the travel business, by about 5,400 last year.
Hence, aligning with Certares blends well with AmEx's strategy
of accelerating its travel business, which constitutes corporate
travel spending of more than $19 billion. According to the Global
Business Travel Assn. Foundation, corporate travel spending is
further expected to grow by 6.6% in the U.S. and about 12.5% from
international travel in 2014. Moreover, AmEx will gain strong
support from Certares' investors that primarily include Qatar
Holdings, Macquarie Capital and
Consequently, the enriched industry experience of both the
parties involved in the JV is expected to swiftly improve its
business-to-business payment solutions and create valued
synergies, while also enable the expansion of its corporate
While AmEx carries a Zacks Rank #3 (Hold), other better-ranked
financial stocks include
Euronet Worldwide Inc.
General Finance Corp.
). Both these stocks bear a Zacks Rank #2 (Buy).
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