Transaction Overview CTM has entered into a binding agreement to acquire 100% of Helloworld’s corporate and entertainment travel business in Australia and New Zealand for an enterprise value of $175 million on a cash-free, debt-free basis (subject to certain standard completion purchase price adjustments). The Acquisition is expected to be approximately 3% EPS accretive on a Pro-forma FY19 basis (excluding synergies) based on Helloworld Corporate’s most recent full-year financials for the period prior to the impact of COVID-19 (being the 12 months to 30 June 2019).5 EPS accretion is expected to be 7% when including estimated full run-rate synergies of $8m upon full recovery to FY19 revenues.6 Completion of the Acquisition is expected to occur in Q1 2022 and is subject to a number of conditions precedent including Australian Competition and Consumer Commission clearance, amongst others (refer to slide 31 of the Investor Presentation also provided to the ASX today for a summary of the Share Sale Agreement).
Overview of Helloworld Corporate
Helloworld Corporate is a part of ASX listed Helloworld, a leading Australian & New Zealand travel distribution company, comprising retail travel networks, corporate travel management services, destination management services (inbound), air ticket consolidation, wholesale travel services, and online operations.
Helloworld Corporate operates via the key brands QBT, AOT Hotels, TravelEdge and Show Group in Australia and APX and Atlas Travel in New Zealand. Its major customers include large-high-quality blue-chip clients, including state and federal governments and agencies across ANZ.
The business generated Pro-forma EBITDA of approximately $22 million in FY19 and approximately $1.6 million during the first quarter of FY22.7
Strategic Rationale
- Builds on CTM’s Core: The Acquisition builds on CTM’s existing core as a global specialist corporate travel management firm, with TTV of approximately A$12 billion and revenue of approximately A$810 million on a Pro-forma FY19 basis8
- Addition of Attractive Verticals: Helloworld Corporate brings new capability to CTM, expanding CTM’s reach into new verticals (such as travel management for entertainment, film, music and arts industries; conference and events in New Zealand). These new verticals are expected to benefit from the removal of COVID-19 related restrictions, with pent-up demand for entertainment and conference-related travel.
- Complementary New Clients: Adds further diversification to CTM’s existing high-quality client base in ANZ, with Helloworld Corporate’s state and federal government and agency clients building further client depth in CTM’s Government sector.
- Scope for Material Synergies: There is scope for material benefits from the integration of Helloworld Corporate with CTM, with estimated full run-rate synergies of $8m upon full recovery to FY19 revenues6.
- Strong Cultural Fit: Cultural alignment between CTM and Helloworld Corporate, with a focus on maximising the value proposition to customers through leveraging technology 5 Based on Pro-forma NPAT excluding transaction costs, one-off integration costs and amortisation of acquired identifiable intangible assets.
- The impact of purchase price accounting has not been completed, which will impact future depreciation and amortisation charges 6 Excluding integration costs. Full run-rate synergies assume recovery to FY19 revenues 7
FY19 financial information is considered to best represent the performance of both CTM and Helloworld Corporate prior to the impacts associated with COVID-19. Proforma EBITDA includes normalisations and excludes costs that are one-off in nature. Assumes FY19 average FX of 1 AUD = 1.04 NZD 8 Pro-forma for the acquisition of Travel & Transport, Inc. and Helloworld Corporate. Revenue & EBITDA are Pro-forma combinations including synergies using FX AUD1.00=USD0.75, HKD6.00, GBP0.55. Does not include organic growth since 2019
3 Integration planning has been undertaken alongside due diligence, with integration expected to be completed within 12 months of completion. One-off integration costs of $5m are expected to be incurred within 12 months post-completion.
Helloworld will provide transitional services to CTM for up to 12 months post-completion.
Jamie Pherous, CTM’s founder and Managing Director, said “We are privileged to be able to acquire these businesses and are excited to be the custodian of such a high-quality portfolio of clients. We feel strongly that we will be able to continue to deliver strong product and service outcomes to their customers with our dedicated focus.”
Andrew Burnes, Helloworld’s CEO and Managing Director, said “We believe that CTM is the right home for our Corporate and Entertainment travel clients in the future. We regard CTM as an excellent operation and know they have particularly high standards of service and proprietary customer technology in the Australian and New Zealand markets and around the globe.”
Trading Update and Pro-Forma Group Position The addition of Helloworld Corporate in combination with the acquisition of Travel & Transport, Inc. will result in a materially larger business upon full activity recovery, with Pro-forma combined revenue of $810 million and EBITDA of $265 million.9 On a Pro-forma FY19 basis, ANZ’s contribution to CTM group revenue would increase from approximately 17% to 27%.
Edited by: Stephen Morton
