Webjet Limited (ASX: WEB) shares entered a trading halt on Monday morning pending the acquisition of Dubai’s Destinations of the World (DOTW) for $240 million.
What’s Going On?
In an ASX filing on Monday, Webjet, one of Australia’s leading online travel bookings sites, revealed the deal worth $US173 million ($240 million).
The acquisition will be funded from a mix of debt, shares issued to DOTW management and investors, and a fully underwritten accelerated pro-rata non-renounceable entitlement offer. (Click here to learn what that means).
Why DOTW?
DOTW is a Dubai-based business-to-business (B2B) travel company operating in the Middle East, Europe, Asia Pacific and the Americas.
According to Webjet, DOTW generated $US529 million ($734 million) of transactions in the year to June 30th, 2018, with EBITDA of $US16.4 million ($22.7 million). Click here to learn what EBITDA means.
DOTW owns the WebBeds brand. Under Webjet’s ownership, it is expected to become the number two player in the global B2B market.
“The acquisition of DOTW continues to consolidate WebBeds’ position as the clear #2 player in the global B2B market,” Webjet Managing Director John Guscic said.
“DOTW is highly complementary to WebBeds’ existing portfolio and significantly enhances WebBeds’ existing Asia Pacific and Americas businesses, while further expanding its presence in Europe and the Middle East and Africa regions.”
What Now?
Following on from its 2017 acquisition of JacTravel, Webjet expects the deal to add mid-single digits to profit/earnings per share in its 2019 financial year, on a pro-forma basis. After synergies Webjet expects the deal to deliver “in excess of 20%” earnings per share accretion in 2019.
In light of the takeover, looking out to its full-year result, Guscic said he continues to see growth for the combined businesses but not everything is tracking at the same pace.
“In particular, we are seeing both TTV and booking growth in Webjet OTA and all regions of our WebBeds division – Europe, AMEA, and Asia Pacific,” Guscic noted. Adding, “in line with our expectations, Online Republic bookings and TTV are flat.”
Webjet expects total EBITDA to be at least $120 million in FY19, including a seven-month contribution from the DOTW business.
According to Google Finance, the Webjet share price has risen from around $10.25 at the beginning of the year to a recent close of $12.91.
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