Carlyle, GIC Back Away from AmEx Global Business Travel Deal--Update
May 09 2020 - 10:54AM
Dow Jones News
By AnnaMaria Andriotis and Miriam Gottfried
Private-equity firm Carlyle Group Inc. and Singapore
sovereign-wealth fund GIC Pte. Ltd. are backing away from a deal to
take a 20% stake in American Express Global Business Travel, whose
revenue has plummeted as a result of the coronavirus pandemic,
according to people familiar with the matter.
The deal, announced in December, values the company at $5
billion including debt. It was scheduled to close Thursday but
representatives for Carlyle and GIC informed AmEx Global Business
Travel on Wednesday they wouldn't participate in the closing, the
people said.
AmEx Global Business Travel, which is 50%-owned by American
Express Co., offers airfare and hotel-booking services mostly to
large and midsize businesses. In 2014 the credit-card giant sold
the other half to a group led by investment firm Certares. Carlyle
and GIC, along with a group of others, agreed to purchase a portion
of that stake last year.
An entity acting on behalf of the sellers filed a motion this
past week in Delaware Chancery Court against Carlyle and GIC,
calling for it to compel the duo to proceed with the purchase.
If the deal is scuttled, it would be the latest high-profile
transaction to fall apart as a result of the pandemic. On May 4, L
Brands Inc. and private-equity firm Sycamore Partners said they
were scrapping plans to take Victoria's Secret private, a decision
that came after Sycamore filed a lawsuit to try to cancel the
deal.
AmEx Global Business Travel isn't party to the dispute. It
"continues to operate with a strong group of existing shareholders
committed to the success of GBT's business," a spokesman said.
"This action neither impacts GBT's ability to manage through the
current environment nor constrains any future opportunity."
Revenue at AmEx Global Business Travel has plunged since the
pandemic closed offices and caused travel to grind to a halt. The
company's sales fell roughly 70% year-over-year in March, according
to people familiar with its financials.
The potential dissolution of the deal throws into question a
roughly $1.2 billion loan to AmEx Global Business Travel for which
the company has received commitments from investors. If the deal
doesn't close by June 30, the lenders could also walk away.
Much of the loan was originally intended to pay a dividend to
stakeholders and to fund a possible acquisition. AmEx Global
Business Travel told lenders in mid-April it would scale back the
dividend payment. Some $112 million of the financing would be used
to pay current and former senior employees in connection with the
deal.
The company has told lenders it is slashing roughly $600 million
in costs, with about half of that coming from pay cuts, layoffs and
furloughs, people familiar with the matter said. It could also tap
the debt market to raise additional cash as Expedia Group Inc. and
other travel-related businesses have done, some of the people
said.
The deal began to unravel in early April when Carlyle raised
concerns that the coronavirus shutdown constitutes a "material
adverse effect" and that the travel-booking business would soon be
insolvent, which the sellers disagree with.
In a Delaware court filing Friday, the private-equity firm
outlined what it alleged were four violations of the purchase
agreement, including that the company was planning to use a
significant portion of its investment to fund operating losses. The
sellers also deny that claim.
Carlyle agreed to do the deal through a vehicle designed to hold
companies for longer than the roughly five years typical for
private equity. The firm's maiden fund with that strategy was one
of three Carlyle identified in its first-quarter earnings report
whose asset values had tumbled so much that they wiped out
performance-related fees it was receiving.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and
Miriam Gottfried at Miriam.Gottfried@wsj.com
(END) Dow Jones Newswires
May 09, 2020 10:39 ET (14:39 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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