KEY POINTS:
Australian travel firm Flight Centre said yesterday it had agreed to buy United States travel retailer Liberty Travel for US$135 million (NZ$179 million) in a deal that will create the United States' 10th largest travel group.
Flight Centre plans to raise A$100 million (NZ$118.5 million) in an institutional share placement to part fund the acquisition, the company said.
Flight Centre shares fell 0.7 per cent to A$27.04 in a broader market down 0.1 per cent.
Flight Centre said the combined business would create the second-largest chain of travel agencies in the United States, with the addition of 193 stores along the East Coast, in Florida and Chicago.
Flight Centre has about 125 outlets in New Zealand.
Managing director Graham Turner said the firm would gain access to an affluent client base and niche products through Liberty.
"The acquisition fast-tracks the business evolution in this key market, as it would have taken years of organic growth and major financial investment to achieve Liberty Travel's results, size and market penetration," Turner said.
Flight Centre flagged it was not done with acquisitions, saying it plans to review its capital structure to increase debt levels to fund future deals.
The Liberty deal, which is valued at 6.8 times 2007 pro forma earnings before interest, tax, depreciation and amortisation, will boost earnings for Flight Centre from 2009.
Flight Centre's founders plan to sell up to 2.6 million shares, worth up to A$68 million at yesterday's share price, without reducing their stake below 50 per cent.
Flight Centre, which in July rejected a private equity joint venture with Pacific Equity Partners, said last month it was looking at international acquisitions which may be funded with debt and capital raisings.
At the time, it said it was considering opportunities in Australia, the UK, US and India.
Flight centre expects first-half profit to rise 40 per cent, helped by the strong Aussie dollar.
- Reuters
