American Express Global Business Travel announced it will go public in a merger with a New York-listed blank cheque company backed by Apollo Global Management in a bet on a recovery in post-pandemic business travel.
The corporate travel arranger was spun off into a joint venture in 2014 by American Express, which retains a 50 per cent stake. After combining with Apollo Strategic Growth, a special purpose acquisition company, AmEx Global Business Travel (GBT) will be renamed Global Business Travel Group and listed on the New York Stock Exchange.
The deal is expected to rake in up to $1.2bn in proceeds, comprising about $817m of Apollo Strategic Growth’s cash held in trust and $335m through a private investment in public equity (Pipe), giving it a pro forma market capitalisation of $5.3bn.
Contributing to the Pipe component will be new investors including Zoom; travel technology company Sabre; private equity groups Apollo and Ares Management; and investment adviser HG Vora. They will join existing shareholders American Express; online booking company Expedia; and boutique investment firm Certares, which recently helped lead car rental group Hertz out of bankruptcy.
The commitments from those new investors were “a massive vote of confidence” in the company, the future of business travel and the opportunities in the sector, Paul Abbott, GBT chief executive, told the FT.
The $1.4tn business travel industry was hit hard during the pandemic, and has been so far been slower to recover than for leisure travellers. A plan for private equity firm Carlyle Group and Singapore sovereign wealth fund to take a 20 per cent stage in AmEx Global Business Travel, which would have valued the company at about $5bn, fell apart in May 2020.
GBT, with $39bn of travel sales, is the biggest player in the corporate travel industry and 40 per cent larger than its nearest competitor, giving it “a tremendous runway for growth”, Abbott said on Friday.
The company is basing its financial forecasts on business travel reaching 70 per cent of its pre-pandemic level by the end of 2023. That did not that mean they were pessimistic about the outlook, Abbott said, but instead wanted to undercut some of the most optimistic projections and “create a floor for investors” and give some confidence of the potential upside.
A resurgence in Covid-19 cases in Europe and the US heading into winter in the northern hemisphere has posed the latest threat to the recovery in business travel. Several governments have tightened restrictions on overseas travellers owing to the discovery of the new, highly-mutated Omicron variant.
“I think we are seeing a more measured and more pragmatic approach” to travel restrictions by governments, Abbott said, adding that he did not think it “changes investors’ view of where the industry is going to be at the end of 2023 or 2024”.