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Summary

  • Corporate Travel Management completed an Institutional Entitlement Offer today, raising ~A$262 million.
  • On 29 September, the business travel management services provider entered an agreement to acquire US-based Travel and Transport, Inc.
  • The favourable announcements acted as tailwinds for the CTD shares which increased by 6.62% and ended the day as the Top Performer on ASX200.
  • The capital raised would be utilised to fund Travel & Transport Inc acquisition.
  • The Company now intends to raise A$113 million through a Retail Entitlement Offer (fully underwritten).
Gold MTF non-AMP

ASX 200 listed Company, Corporate Travel Management Limited (ASX:CTD) provides innovative & cost-efficient travel solutions to the corporate market.

On 30 September 2020, the Company completed the Institutional Entitlement Offer of its 1 for 4.03 accelerated pro-rata non-renounceable Entitlement Offer.

The capital raising announcement, coupled with the acquisition announced a day before, led to optimism in the investor community with CTD share price moving up by 6.621% by the end of the session. With CTD stock under trading halt until today, market participants got a chance to react to the acquisition announcement today only.

Today’s share price increase pushed the stock to the number one position among ASX200 constituents. CTD shares have delivered impressive returns of 67.29% and 113.47% in the last three months and six months, respectively. The Company has a market cap of A$1.76 billion, with ~109 million outstanding shares.

Now let us look at the announcements that put CTD stock on top today.

CTD, today, completed the Institutional Entitlement Offer and raised ~A$262 million at the offer price of A$13.85 per new share. The Company’s founder and MD (Managing Director) was not a part of the Entitlement Offer.

Under the Offer, ~18.9 million new shares would be allocated, with trading on the ASX likely to start on 08 October 2020.

Use of The Funds:

The raised amount would be utilised in funding the acquisition of US-based Travel & Transport Inc for an enterprise value (cash and debt-free) of US$200.4 million (or A$274.5 million).

Acquisition of Travel & Transport Inc:

On 29 September, The Company signed a binding deal to purchase Nebraska-headquartered Travel & Transport.

Travel & Transport Inc is engaged in the corporate travel business with a total transaction value of US$2.8 billion (A$4 billion) or CY2019. The Company was established in 1946 is entirely owned via an ESOP.

The transaction is anticipated to be nearly 10% EPS accretive on a Pro-forma CY2019 basis. After involving estimated full run-rate synergies of US$18 million (or A$25 million), the transaction is likely to be ~30% EPS accretive.

The deal is set to take effect in late October and is contingent on antitrust approval, among other factors.

The customer mix of Travel & Transport Inc complements that of CTM. It focuses on professional services as well as healthcare clients. Besides, Travel & Transport Inc has less client concentration, with the biggest customer being only 2.5% of CY2019 air volumes and leading 50 customers representing below 45% of CY2019 air volumes.

Additionally, Travel & Transport owns 100% of Radius Travel which functions a large-scale hotel program. Radius is amongst the top programs of its kind internationally and has partnerships with leading global hotel brands in 160 nations.

Strategic Rationale Behind the Acquisition:

In its announcement, Corporate Travel Management Limited provided a few rationales behind the acquisition of Travel & Transport Inc.

  • Build Scale: Once the acquisition completes, CTM would be able to strengthen its position amongst the top mid-market corporate travel managers in the world with total transaction value (TTV) of A$10.8 billion. North American total transaction value would be of US$3.6 billion.
  • Sector and Geographic Focus: Travel & Transport has a highly complementary industry and geographic profile and has a strong focus on clients providing financial and professional services clients. In New York, the Company has a formidable customer base. With the acquisition, CTM would have the opportunity to serve international clients.
  • Global Hotel Program: Radius being amongst the top programs of Travel & Transport, the acquisition would provide an improved offering to CTM clients.
  • Opportunity for Material Combination Benefits.
  • The acquisition would strengthen US leadership.

A Glance at Retail Entitlement Offer:

Through the fully underwritten Retail Entitlement Offer, the Company intends to raise A$113 million. Under the Retail Entitlement Offer eligible shareholders having registered address in AU or NZ on 01 October 2020 (Record Date) would get the chance to participate in the Offer at the Offer Price based on retail offer booklet’s T&C. The retail offer booklet would be sent to the qualified shareholders on 06 October 2020.

Under the Retail Entitlement Offer (fully underwritten), for every 4.03 CTM shares, the qualified shareholders can subscribe for 1 new share.

A Peek into Important Dates of Entitlement Offer:

INTERESTING READ: Why are ASX 200 Travel Stocks under spotlight with Australia's extended travel restrictions?

 

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