Travelport Worldwide (NYSE: TVPT) announced strong fourth-quarter 2018 results late last month -- though shares were little changed considering the travel commerce platform leader only recently agreed to be acquired in a go-private deal worth $4.4 billion.
But that deal is also still subject to both shareholder and regulatory approvals. So in the meantime, let's take a closer look at how Travelport ended 2018, and what investors can expect in the coming months.
IMAGE SOURCE: GETTY IMAGES.
Travelport results: The raw numbers
GAAP net income
GAAP earnings per diluted share
Data source: Travelport Worldwide. GAAP = generally accepted accounting principles. YOY = year over year.
What happened this quarter
- Adjusted for items like stocks-based compensation, Travelport's (non-GAAP) net income declined 10% to $39.7 million, and fell 11% on a per-share basis to $0.31.
- By comparison -- and though we don't usually pay close attention to Wall Street's demands -- these results were above consensus estimates for adjusted earnings of $0.26 per share on revenue of $579.5 million.
- Adjusted EBITDA rose 1% to $139.7 million.
- Travel Commerce platform revenue grew 3% to $565.8 million, including 11% growth in Beyond Air revenue to $181 million, and a slight decline in Air segment revenue to $384.7 million.
- Technology services revenue fell 6% to $22.9 million.
- By geography:
- Asia Pacific revenue rose 8% to $137.8 million;
- Europe revenue climbed 4% to $191.4 million;
- Latin America and Canada revenue fell 1% to $25.4 million;
- Middle East and Africa grew 9% to $79.6 million; and
- United States revenue fell 5% to $131.5 million.
- On Dec. 10, 2018, Travelport agreed to be acquired by affiliates of Siris Capital Group and Evergreen Coast Capital for $15.75 per share in cash. That price represented only a modest 2% premium from its previous trading day's close, and was good for a transaction value of roughly $4.4 billion, including the assumption of around $2 billion in debt.
What management had to say
At the time of the acquisition announcement in December, Travelport Board Chairman Doug Steenland stated:
This is a good outcome for Travelport's shareholders. Assisted by external advisors, the Board concluded unanimously, after taking into account the ongoing development needs of the business, that entering into this agreement represents the best way to maximize value for shareholders. It also enables the company to continue its work to position itself for growth in the evolving global travel industry.
In Travelport's earnings release, CEO Gordon Wilson stated:
I am pleased to report that we ended the year with all of our full year key financial performance measures either in line with or better than management expectations and guidance. We also made significant operational progress across our four customer priorities of delivering superior choice, performance, experiences and intelligence in travel and payments. In December, we announced we entered into a definitive merger agreement to be acquired by affiliates of Siris Capital Group, LLC and Evergreen Coast Capital Corp. We continue to work toward finalizing the merger, which currently is expected to close in the first half of this year.
Travelport is no longer providing forward guidance in light of its impending acquisition. To that end, Travelport shareholders of record on Feb. 4, 2019, are set to vote on the acquisition at a special shareholder meeting on March 15, 2019. Investors should note that Travelport's board of directors has unanimously approved the deal, and recommends shareholders vote in favor as well. And Elliott Management -- the private equity affiliate of Evergreen Coast Capital -- has agreed to vote in favor with its nearly 12% stake in the company.
To be clear, it's hard to blame investors disappointed by the terms of the deal, considering the purchase price is well below Travelport's 52-week high (of $20.30 per share) set last summer -- though it also marks a nearly 19% premium from Travelport's 52-week low set in November.
Nonetheless, after coupling the challenging market headwinds Travelport has faced in recent quarters with the glowing approval by its board of the proposed acquisition, it seems clear Travelport isn't too keen on the idea of moving forward as a publicly traded company. So whether it secures the necessary approvals or not, and assuming waiting longer to sell won't result in more favorable long-term capital gains tax treatment, I think Travelport investors would do well to sell their shares and put their money to work elsewhere.
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