Travelport's decision to come off the public financial markets via a sale to private equity has drawn a lukewarm reaction to its long-term future.
The deal, slated for 2019, was announced last week as part of a $4.4 billion takeover package by Elliott Management Corporation and others.
The company will be under the full ownership by the end of the second quarter of next year of Siris Capital Group and Evergreen Coast Capital (part of Elliott).
Travelport says existing shareholders will receive $15.75 per share in cash. It hit almost $20 per share in July this year but has lost almost a quarter of its value since.
The company will now enter a "Go-shop" period until January 23, 2019, whereby other bids can be entertained ahead of the closing date of the original deal.
In an investor note, investment banking group Bernstein says the sale price of $15.75 per unit to shareholders is a 12.5% uptick on Travelport's lowest level over the course of the last six months.
Travelport has also generally traded at around $14.15 since its IPO in September 2014 but the premium offered is "quite low."
Analyst remarks
The guidance notes that Travelport has "suffered three recent client specific headwinds" that will impact on its 2019 results, although the business could be more valuable in the longer term in the light of the tearaway growth of payment business eNett.
On the optimistic side, Bernstein believes Travelport is in the late stages of a "financial and operational turnaround" which will assist in its ability to drive down owned debt.
The business' eNett division and merchandizing platform are "critical pieces" to the overall success of the company, it says.
That said, risks are numerous, Bernstein says, including airlines "cutting GDS out of the market and offering flight reservations only from their own website or directly to a limited number of travel services."
A potential wrinkle in the eNett division may come in the form of if demand is lower due to the move of consumers to other payment systems or credit cards, the group says.
Other distribution watchers caution that Travelport's move away from the public markets will not see an end to the scrutiny it has received from bankers.
Norm Rose of Travel Tech Consulting and a Phocuswright analyst says: "It is important to note that companies that go private funded by private equity, have their own set of challenges as the investors want to see a strong return."
Its apparent narrower field of operations may also hinder it.
Rose says: "Travelport does not offer a passenger service system (PSS) to the airlines as does Sabre and Amadeus. Both these competitors have seen continued positive contribution of the PSS business to the bottom line.
"The pending Sabre acquisition of Farelogix may foretell greater challenges for Travelport as Sabre leapfrogs the implementation of NDC development and deployment, even though Travelport was the first GDS to receive is certification as a Level 1 Aggregator."