Amex GBT's Big CWT Deal Would Add Scale but Faces Scrutiny

American Express Global Business Travel's newly announced acquisition of rival CWT would be a merger of giants but might not face the regulatory scrutiny that has quashed recent major mergers in the travel industry.

The $570 million acquisition, which would be one of the largest mergers of travel management companies in recent history, would add about 4,000 customers from CWT to Amex GBT and boost its total transaction volume by 45 percent and revenues by 33 percent, Amex GBT CEO Paul Abbott said in an investors' call on Monday. CWT this year is projected to have $14 billion in TTV and $850 million in revenue, Abbott said. Amex GBT in its fourth-quarter earnings report gave full-year 2024 guidance of between $2.43 billion and $2.5 billion in revenues.

Abbott said the deal is "highly accretive" and is "forecast to break even in [earnings per share] in year one."

"Joining forces with Amex GBT helps accelerate our vision of a tech-enabled future for business travel, where people and technology combine to deliver an exceptional customer experience," CWT CEO Patrick Andersen said in a statement. "We are highly confident in the value creation of the combined company."

In terms of customers, Abbott said CWT has "a strong presence in high-value segments" including energy, resources and marine travel; media, entertainment and sports; and defense and government. Amex GBT has "a footprint in some of these, and it will give us significant volume to create dedicated verticals." The acquisition also will grow Amex GBT's small and midsized enterprise business by 35 percent, according to Abbott. The SME segment has been a focus for CWT as it has for Amex GBT, such as its small business offering in partnership with Booking.com.

"Through the integration of CWT, we will grow our footprint in high-value industry verticals, expand our professional services businesses and bring more customers onto our software solutions to further differentiate our business and add significant value," Abbott said.

Amex GBT CFO Karen Williams said AI and automation is a "significant opportunity" in the acquisition, tapping generative AI use cases that are within the myCWT platform.

Per the deal, which both TMCs' boards have approved, Amex GBT will finance about $430 million of the transaction by issuing about 71.7 million shares of its common stock at a fixed price of $6 per share, a move that also will diversify the TMC's shareholder base, Abbott said. Amex GBT will retire CWT's debt with cash on hand, he said.

Following the transaction, CWT shareholders—which are largely investment funds, following a prepackaged Chapter 11 filing and recapitalization process that began in 2021—will own about 13 percent of the combined company, Williams said.

Regulatory Challenges?

The TMCs said they expect to close the transaction in the second half of this year, though that will depend on regulatory approval in what has proven to be a difficult regulatory environment, at least in the United States, as of late. JetBlue and Spirit, for example, earlier this month called off a planned merger amid regulatory challenges, and Choice Hotels International also abandoned a hostile bid to acquire Wyndham Hotels & Resorts, a move the Wyndham had rebuffed citing a difficult path to regulatory approval.

Amex GBT acquiring CWT is certainly a merging of giants in the global corporate travel management space. Among BTN Europe's ranking of Europe's leading TMCs, Amex GBT in 2023 ranked first and CWT third, outranked only by BCD Travel. In the broader space of travel sellers, Amex GBT last year ranked third on BTN sister publication Travel Weekly's 2023 Power List, behind Booking Holdings and Expedia Group; CWT ranked fifth, again behind BCD.

Even so, some analysts said they do not expect pushback from regulators in the deal. For one, this is a "midsized transaction" compared with, for example, the proposed merger of Booking Holdings and Etraveli, which the European Commission blocked last year, said Morgann Lesné, a travel technology M&A expert with Cambon Partners.

"These are not the typical giants the antitrust authorities are after," he said. "The EU Commission probably has better things to do than try to regulate midsized transactions. Although it makes a lot of noise in the market, in terms of size, it is quite modest."

A CWT acquisition is hardly Amex GBT's first foray in bringing in a large competitor, though it is proportionally larger than its two most recent major mergers. The 2018 acquisition of HRG—a £410 million acquisition of what was at the time the fourth-largest TMC—boosted Amex GBT's TTV by 25 percent, according to Williams. The 2021 acquisition of Egencia added 27 percent in TTV, she said.

Also pointing in favor of regulatory approval is that the merger could be an existential necessity for the TMCs, according to Lesné. He said he was "surprised" by the price Amex GBT is paying for CWT, calling it an indication that CWT "was not in great shape," and he said it "puts a light on the real threats for [CWT] to stand alone."

As such, Lesné said he expects there will be "some investigation" and "commitments with regards to employment" on the path to consolidation, but he said he is hopeful it will be approved.

"It's not like it is an extremely profitably company buying another profitable company," Lesné said. "It's two companies that are fighting to survive, especially [CWT.] Regulation can have an impact, but when the survival of an industry is at stake, they will have more open views on the situation."

Former American Airlines executive Cory Garner's eponymous consultancy in a LinkedIn post on Monday also said he did not expect any major challenges to the acquisition by antitrust regulators.

"There will certainly be some raised eyebrows among airlines, hotels, smaller competitors and large multinational corporate travel clients, since the largest legacy TMC by far is acquiring one of its only global competitors," Garner said in the post. "However, in our view, it is too difficult to narrow the market's definition to only the global, legacy TMCs. The corporate travel management market has seen new entry from next-gen TMCs like Navan, AmTrav, TravelPerk, Spotnana and others and is under new pressure from airline distribution strategies to attract corporate travelers to their own website."

Even so, Garner questioned whether it the acquisition is a good business move by Amex GBT, especially given ongoing challenges to the legacy TMC model based on commissions and global distribution system incentives. He said a combined Amex GBT-CWT would not necessarily continue to grow at the same pace as they were independently.

"Implicit in this assumption is that nearly all CWT clients will be happy to remain with GBT through a potentially messy transition, notwithstanding the possibility that at least some of them chose CWT precisely to avoid GBT," Garner said.

Lesné, meanwhile, called the acquisition a "good signal" for the industry.

"Amex has a very robust technology with the KDS platform, and CWT will benefit from the advance of technology," Lesné said. "In terms of commission, size might command lower commissions at some point or a higher level of service, but customers will still have choice, because if they're not happy with the way they are treated by Amex, they can move to Navan or TravelPerk."

He added that it's an indication of a "stronger market" for M&A activity in the travel tech side, for both corporate and leisure travel. Garner also said to watch for "knock-on" decisions that other players might make in response.

"For example, SAP Concur has the largest client base of any online booking tool and could see this as a long-term strategic threat to their market position," according to Garner. "What is their best move?"