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Tuesday, February 10, 2015

IPO MIschief - The GDS Industry: An oligopoly where all three players have gone public twice. Really?



Consistently, as I look at the statistics on my blog, one of the top blogs is the one where I talk about the biggest GDS (Global Distribution System) company.  This week was no different. 

I can only imagine that the rumors about Sabre buying Abacus are fueling the renewed interest in my 2011 blog "Who is the biggest GDS".  Or perhaps it is the fact that Orbitz is on the market and anyone thinking about an Online Travel Agency (OTA) has to first understand the Global Distribution System (GDS) market.

For those that don't know, the three main oligopolists are Sabre (based in Dallas), Amadeus (based in Madrid) and Travelport (based in Atlanta with executive offices in the UK).  I know that term sounds obscene, but truly, I looked it up!

One of the things that you may not know is that all three of these companies have had not one, but two public offerings.  That is right, two IPOs each.   Personally I think they should have to call them SPOs (secondary public offering).  

Really, I don't think that it matters a bit which GDS is bigger.  Big can be measured in the most users, the most countries served, the most bookings processed or the most revenue or profit.  But what really matters is what the market believes that the company is worth.  
  
For the GDS companies that is not only what the public markets think, but what they have been able to get the Private Equity community to invest and what kind of an exit the PE companies can get from taking the company back to the public markets after going private yet again.

I have to admit that I completely missed Travelport's most recent $480m IPO, where they sold approx. 68% of the stock.  The offering is Travelport’s second attempt to go public in four years and that doesn't count their first IPO in 1997, which brought in $783m. The company said in 2010 that it planned to raise almost $1.8 billion in a London IPO. The share sale was later canceled due to volatility caused by the European sovereign debt crisis.  When measured by revenues and by profits, Travelport comes in third.  The company comes in second when measured by booking share.  Overall, a solid 3.

Earlier this year Sabre went public, selling 20% of the company for $721m.  Their first IPO was in 1996 for $545.5m.  TPG and Silverlake took the company private in 2006 for $4.8b. The company currently has a market cap of $5.4b.  They are second in revenues and profits, third in bookings and #2 in valuation.  Overall, a solid 2.

By all measures, Amadeus is still the biggest - the most bookings, the most revenue, most profitable and is valued the highest by the marketplace, by a huge margin.  Amadeus also went public this year, for the 2nd time.  Their offering was a resounding success, raising $1.74b in Europe's largest IPO since 2008.  This likely accounts in large part for their market cap of $17.9b.  


While the full year 2014 results won't be available from the three companies for another 3 weeks, I decided to put together an infographic today that gives a snapshot of the GDS companies.  I promise to update it at the end of February when all their results are in.

Stay tuned.





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