Less than one week after Sabre
called off its merger with Farelogix, there’s yet another cancelled acquisition
in the travel industry.
As part of its first-quarter earnings release today, WEX
says it will not continue with plans to purchase eNett, Travelport’s payments
business, and virtual card issuer Optal.
had announced the $1.7 billion purchase deal in January, agreeing to pay
$1.275 billion in cash and the rest in common stock to Travelport and its
owners, Siris Capital Group and Elliot Management Corporation for eNett and to private
shareholders for Optal.
But in a call today with analysts to discuss the financial
report, WEX chair and CEO Melissa Smith says the deal is off.
Subscribe to our newsletter below
“We’ve concluded that the pandemic and the conditions
arising in connection with it have had and continue to have a material adverse effect
on the businesses of eNett and Optal,” she says.
“It was a lot of hard work to get the deal signed and this
is obviously not a situation that any of us wanted or expected to be in back in
January. This is not a decision we have taken lightly. WEX has never walked
away from a signed deal, but we’ve been analyzing this situation closely with a
lot of work done by specialist advisors to reach this conclusion.”
In response, Travelport, eNett and Optal released a joint
statement that they “reject WEX’s attempt to walk away from its binding
agreement” and intend to hold WEX to the deal.
The three companies say the COVID-19 virus had already begun
to spread across the globe when the deal was signed on January 24 and the
agreement “expressly excludes the effects of a pandemic from the definition of
Material Adverse Effect. In addition, the definition
of Material Adverse Effect also excludes the effects of any changes in laws or
regulations, such as governmental travel restrictions. WEX therefore
assumed all of these risks when it signed the Purchase Agreement.”
Purchase volume in WEX’s
Travel and Corporate Solutions' segment decreased 4% to $8.0 billion in the
first quarter of 2020 compared to $8.4 billion in the first quarter of 2019. Revenue
from the segment increased slightly to $84.4 million in the first quarter
compared to the same period one year ago, with the growth attributed to an 17%
increase in payment processing revenue that offset a 35% drop in other revenue.
The company says global
travel spend volume was down about 90% in April compared to 2019.
“We continue to work with
our customers and want to be there to support them,” Smith says.
“We do think that market
will be slower to come back. We are doing business in many different verticals
and travel, compared to anything else we are doing, is having a longer scale in
terms of recovery. It doesn’t change our view.”