Amadeus IT Holding SA agreed to buy Accenture Plc’s Navitaire for $830 million as the flight-bookings provider seeks to add products that target low-cost airlines in its largest acquisition.
Amadeus’ own offerings largely target full-service carriers and the company said it intends to market and sell the two product portfolios separately, investing in both. The deal is expected to be completed by the end of 2015 and as many as 550 Navitaire employees will be transfered to Amadeus.
Amadeus’s main business is under pressure after Deutsche Lufthansa AG, Europe’s largest carrier by revenue, last month said it will impose a 16-euro ($18) charge on external reservations. The levy means that travel bookers like Amadeus, Sabre Corp. and Travelport Worldwide Ltd. would either pass on the charge or absorb the cost, reducing profit.
Amadeus shares rose as much as 4.6 percent in Madrid, the steepest intraday gain since Oct. 28., and advanced 0.2 percent to 36.33 euros as of 1:14 p.m. That values the Madrid-based company at 16.3 billion euros, more than three times Lufthansa’s market value. The German carrier was among the founders of Amadeus in 1987.
The acquisition will reinforce Amadeus’ IT division in the low-cost carrier and hybrid segments and will “support long-term growth in a moment of uncertainty for its distribution business,” Kepler Cheuvreux analyst Natalia Bobo wrote in a note on Thursday. “Both companies are complementary from a geographical and customer standpoint.”
Lufthansa said it was frustrated about the profits made by providers of distribution services when compared with airlines, and fears about other carriers following suit contributed to a 12 percent drop in Amadeus’s shares on June 3.
Low-cost carriers have been outgrowing full-service airlines in Europe, with Ryanair Holdings Plc now carrying more international customers than any other airline. Lufthansa is bundling its European point-to-point services in an effort to create the region’s third-largest player.
“We think the price is reasonable, a good price for us and we expect to justify the value of the acquisition,” Amadeus Chief Executive Officer and President Luis Maroto said on a call with reporters on Thursday.
The acquisition is “appealing” and the price values Navitaire at about 4.2 times sales and 13.8 times earnings before interest, taxes, depreciation and amortization, Oddo Securities analysts including Yan Derocles said in a note to clients, adding the price is in line with current valuations in the industry.
Accenture will also provide Amadeus with infrastructure outsourcing as well as research and development services, according to a statement.