Elliott targets travel software for latest massive LBO

[The AchieVer]

A month after teaming with a private equity firm on one multibillion-dollar buyout, activist investor Elliott Management has lined up another such deal. 

This time, the target is travel software specialist Travelport. The private equity partner is Siris Capital. And the total value of the deal is $4.4 billion, with a price of $15.75 per share representing a 2.3% premium to Travelport's closing share price on Friday. 

That percentage certainly doesn't tell the whole story, however, as the company's stock has experienced a roller-coaster 2018. After diving below $12.50 per share in February, shares of Travelport (NYSE: TVPT) had risen above $14.30 in March when Elliott disclosed a 12% stake in the British business, which in turn sent the stock up above $16 per share. The price rose to above $20 over the summer in anticipation of a possible deal, but it slowly returned to below $15 per share as the year winds down. 

Siris and Elliott's deal with Travelport (which technically involves Elliott's Evergreen Coast Capital subsidiary) comes on the heels of an even pricier Elliott-backed maneuver, a $5.7 billion takeover of Athenahealth that the firm agreed last month to conduct in conjunction with Veritas Capital. Like its pact with Travelport, Elliott's deal with Athenahealth also came after the hedge fund had previously disclosed a substantial stake in its future target. 

And like the Travelport takeover, Elliott's deal with Athenahealth came after a decent bit of stock price-related drama, with the sides ultimately agreeing to a price of $135 per share after the provider of healthcare IT services had rejected a $160-per-share offer six months prior. 

Siris and Elliott's acquisition of Travelport, which operates a B2B platform used by travel and tourism providers, won't be completed until 2019. The current year, however, has been a relatively quiet for one private equity dealmaking with other companies in the application software sector. To date, firms have completed just 109 PE deals in the space across the US and Europe, per the PitchBook Platform, on track for the lowest total since 2013. 

The average value of those deals has rocketed up, but that's largely thanks to a single purchase: Hellman & Friedman's buyout of Nets for well over $5 billion, accounting for more than a third of the year's overall extrapolated deal value, per PitchBook data. Still, though, as the current generation of VC-backed software companies matures and becomes more attractive to private equity firms, it's perhaps likely that the average price of application software buyouts will remain elevated in the coming years. 

Travelport has been publicly traded since 2014, when the company conducted an IPO priced at $16 per share—quite close to the price of its pending sale to Siris and Elliott. Before going public in 2014, the company had been owned by Blackstone and TCV for eight years, the two firms having conducted a $4.3 billion buyout in 2006

 

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