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On-line travel company Lastminute.com has bought Travelselect.com Limited for STG9 million, effectively tripling the company's UK flight volume.
The all-paper deal will see Lastminute issue 14.5 million new shares to the owners of Travelselect. In addition to the initial consideration, Lastminute will pay a further consideration depending on the EBITDA achieved for the year to 31 January 2003. The companies said the additional consideration has been capped to a maximum payment of STG3 million, either in new shares or in loan notes.
Of the 14.5 million new shares, 89 percent are subject to lock-up provisions for 12 months from the completion of the deal.
According to Lastminute, Travelselect is profitable and has grown sales by over 40 percent annually for the past three years. Moreover, the deal means that Lastminute will increase its volume of flights in the UK significantly, creating a total UK flights revenue stream of STG50 million per year, the company claimed.
According to the latest unaudited accounts for Travelselect.com Limited for the year to 31 January 2002, the company had turnover of STG38.2 million, gross profit of STG3.3 million and a loss before tax and goodwill amortisation of STG3.1 million. Net assets at that date amounted to STG0.8 million including net cash of STG2.7 million, but after excluding STG8.7 million of intangible assets.
As part of the deal, Travelselect's 87 full time employees, based in London, will become employees of Lastminute, which currently employs around 550. David Howell, the chief financial officer of Lastminute said that the company expected to make no job cuts as a result of the acquisition.
Vimal Khosla, majority shareholder and chief executive of Travelselect.com Limited, will join the Lastminute.com board as an executive director with immediate effect.
For Lastminute, the deal will push it closer to its goal of reaching profitability in the UK and France, the two markets that comprise over 80 percent of the company's revenues. The company says that it is on track to deliver operating profit in these markets in the April to June 2002 quarter. According to Howell, Lastminute has also set a target of operational profitability across the group for the year ending in September 2003, and is on track to meet that goal as well.
Howell also says that the agreement will add significantly to the company's UK flights business, which has been a weaker segment in the business when compared to its hotel booking service. With the new strength in this area, the company hopes to launch a new dynamic packaging service in the coming weeks that will let users "build their own holidays," Howell said.
While much of the travel industry was hit hard by the economic slowdown and the events of 11 September, Lastminute has said that its business came through the crisis with only scratches and bruises. Lastminute.com, which was the only firm to appear in Jupiter Media Metrix's top ten most visited travel sites in the UK, France, Germany, Sweden, Italy and Spain last year, said it had few travel-related cancellations after the 11 September attacks because the US accounts for only four percent of the amount spent by customers on its Web site.
Travelselect.com has been in business for over 19 years and sells approximately 200,000 flight tickets annually. The company has in the past been geared toward travel sales off line, but in the past 12 months the firm has shifted its focus toward the on-line space. Internet bookings at Travelselect.com generated on-line now account for some 80 percent of total transactions.
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