US giant Booking.com buys into NZ's Serko

Serko staff including CEO Darrin Grafton (pictured) and chair Simon Botherway will sell $16 million worth of shares. Photo / Supplied

Auckland-based Serko said it plans to raise $45 million of new capital to fast-track the roll-out of its Zeno travel management platform and will bring the booking.com website owner into the fold as a cornerstone shareholder.

Booking Holdings (the Nasdaq-listed tech giant that runs Booking.com and has a US$86b market cap) will end up with a 4.7 percent stake in Serko and inject $17.5 million of the total capital raised in a $40 million placement at $4.04 a share. Serko staff including chief executive Darrin Grafton and chair Simon Botherway will also sell $16 million at the same price into the placement to institutional investors in New Zealand, Australia, the UK and Singapore.

The shares last traded at $3.42, after slumping 11 percent yesterday before trading was halted pending the announcement of a capital raising. The halt will stay in place for the placement's bookbuild.

A share purchase plan will be offered to existing shareholders to raise a further $5 million, at either the placement price or the five-day volume-weighted average price, whichever is lower. Serko said it thought the plan would cater to the majority of non-institutional investors.

Booking Holdings has agreed to expand existing arrangements with Serko as part of the deal to offer and promote the Zeno product. Serko said it expected the new commitments to offer a material boost to revenue from the March 2021 financial year and support its goal of achieving its medium-term goal of generating $100 million of annual revenue.

"The Serko and booking.com agreement will accelerate our journey toward our vision of seamless corporate travel and expanding our growth outside of Australasia," Grafton said in a statement.

He later told the Herald, "When the largest company in the world in your sector backs you, it's pretty good."

Grafton said beyond capital injection, he expected Booking.com would be able to offer some smarts about what it had learned in the hotel market, and from other sites in its stable such as RentalCars.com and OpenDining.com.

It would not get a board seat, he said.

The Booking investment has fishhooks. Serko would have to tell Booking if it received an offer for 50 percent or more of the firm's equity or its assets for an agreed period, and would also restrict Serko from issuing shares to certain parties, none of whom are current shareholders.

The funds raised will go towards the Zeno roll-out and Serko said it expected to significantly expand its workforce to support the projected expansion.

Separately, Serko said revenue rose 29 percent to $14.7 million in the six months ended Sept. 30 and affirmed annual guidance for revenue growth of 20-40 percent.

It posted a net loss of $861,000, turning around a first-half profit of $920,000 a year earlier, with earnings before interest, tax, depreciation, amortisation and fair value adjustments down 6 percent to $1.4 million. The bottom line included a $585,000 expense related to earn-outs on its InterplX acquisition.

Serko had cash and equivalents of $10.3 million as at Sept. 30, with a cash burn of $5.5 million in the first half. It said it expected that cash burn to continue into the second half.

Botherway said the company expected transactions to grow in the second half as travel management companies completed user testing and converted to pilot customers.

"However, the timing of uptake by new corporates is unknown and subject to variables," he said.

(BusinessDesk)