Webjet says it will become the world’s second largest online travel wholesaler when it forks out $332 million to buy European booking agent JacTravel.
The online travel agent said it would buy the UK-based JacTravel, which wholesales hotel rooms and group tours, for £200 million ($332 million) to expand its existing WebBeds wholesale business.
Webjet, based in Melbourne, said the investment would grow its wholesale business from about 10,000 hotels to about 17,000, making it the second-largest player both in Europe and worldwide.
“JacTravel is highly complementary to WebBeds’ existing portfolio in terms of geography, product and customer mix, with an operating footprint that fills a key gap in our current offering, being Tier 1 European cities,” Webjet’s managing director John Guscic said.
The investment would also increase “the breadth and depth of WebBeds’ existing position across Asia, the Americas and Middle East”, Mr Guscic said.
Webjet will issue $164 million worth of new shares to fund the acquisition. Existing shareholders will be able to buy one new share for every six they already own for $10 each – an 8.6 per cent discount to Webjet’s trading price on Tuesday.
The company said it would pay another $145 million in cash from its own coffers and through debt funding. It would also issue about $30 million of new shares to JacTravel’s management shareholders and its private equity owner as part of the transaction.
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Webjet’s shares were trading as high as $12.54 last week, but had plunged to $10.94 by Tuesday after it revealed a dispute with its auditor BDO over how it accounts for transactions linked to tour operator Thomas Cook.
Webjet’s 2017 EBITDA would fall $11.5 million and it would be forced to slash the carrying value of its intangible assets by $32.7 million if it accepted BDO’s treatment of those transactions, the company said. Two of the “big 4” accounting firms disagreed with BDO’s position, Webjet said.
The entitlement offer will be open to institutional investors on Thursday and will be open to retail investors for 12 days starting next Thursday, August 10.
Buying JacTravel will increase Webjet’s earnings per share by at least 25 per cent, it said.
JanTravel generated earnings before interest, taxation, depreciation and amortisation of $32 million in the 12 months to June 30 2017, implying its $323 million price tag has an earnings ratio of 10.5 times.
Webjet shares have not resumed trading since entering a halt on Wednesday morning ahead of announcing the acquisition.