Amadeus Agrees To Acquire IFAO

Amadeus has agreed to acquire German travel technology firm iFAO Group, the companies announced Thursday. A statement from Amadeus indicated the company's intention to grow its corporate travel IT business, which it described as "a fast-growing market." Amadeus made no mention of any plans to integrate iFAO's tools, which include self-booking and expense management components, with its own e-Travel Management self-booking system. Amadeus did not address how the two sets of corporate travel technology would be positioned in the market or if any integration is envisioned, telling The Beat that it cannot comment on those issues before the deal is finalized. The acquisition is contingent on German regulatory and iFAO shareholder approvals.

IFAO provides Cytric, which it describes as "Europe's most widely used cloud services for planning, booking, managing and expense reporting business travel." The Amadeus announcement indicated that the addition of iFAO would help it "deliver an innovative and attractive end-to-end solution to corporations, including expense management."

Corporations account for "about 45 percent of all trips made worldwide," according to Amadeus senior vice president of distribution Holger Taubmann. "The corporate travel IT business—focused on providing corporations with applications to help automate travel policy, handle their booking flow and simplify the travel expense claim process—is currently estimated at around €2 billion to €3 billion a year (US$2.8 billion to US$4.1 billion), with significant growth expected over the next years."

In a prepared statement, iFAO founder and CEO Louis Arnitz claimed a "leading" position in Germany, Austria, Switzerland and "a growing presence" in the United Kingdom, Scandinavia and Central Europe. "Global end-to-end travel IT solutions are critical for big multinational corporations' requirements," according to Arnitz. "Becoming part of a truly global leader in the travel industry with Amadeus will allow us to develop the ability to meet our customers' requirements worldwide." In total, iFAO in its 2013 annual report claimed to serve large and midsize corporations and government agencies in 82 countries.

According to the annual report, "only very few companies, e.g. in Europe approximately 15 percent, use all technical possibilities to efficiently reduce travel cost. This will change substantially in the coming years."

IFAO claims distribution partnerships with American Express Business Travel, BCD Travel, Carlson Wagonlit Travel, FCm Travel Solutions, HRG and several national TMCs in Europe. It plans this year to release several enhancements to its tools, including a revised Cytric mobile app.

Traded on the Frankfurt Stock Exchange, iFAO is headquartered in Frankfurt and operates sites in Hanover, Germany and Sofia, Bulgaria. In 2013 it generated revenue of €14.4 million (US$19.8 million), up 10.3 percent from the prior year—roughly in line with an 11.1 percent compound annual growth rate since 2005. The company's 2013 earnings before interest, taxes, depreciation and amortization was €4.6 million (US$6.3 million), up 25 percent year over year, with an EBITDA margin of 32 percent.

Amadeus indicated that 170 iFAO employees would come over as part of the deal, including the company's management team.

Amadeus is pursuing the acquisition through a tender offer that requires acceptance by iFAO shareholders representing at least 75 percent ownership. Because Arnitz and "other major shareholders" have committed to selling, Amadeus claimed to have already secured "irrevocable undertakings with investors owning 68.5 percent."

"Under the terms of the agreement, Amadeus will pay €15 per share (US$21) with a total enterprise value—after cash adjustments—of €67.2 million (US$92.5 million)," according to the prepared statement.