Hogg Robinson To Sell HRG To Amex GBT, And Fraedom To Visa
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From The Beat ~ a travel business newsletter:

Two of the world’s largest travel management companies are set to merge after American Express Global Business Travel offered up to £410 million to buy Hogg Robinson Group.

Amex GBT will combine with Hogg Robinson’s TMC business HRG. Hogg Robinson also confirmed a separate agreement to sell its other division, the payments and expense management software-as-a-service business Fraedom, to Visa for £141.8 million. Hogg Robinson said the bid from Amex GBT was unsolicited and came when it was already in early discussions to sell Fraedom to Visa.

Nevertheless, Hogg Robinson’s directors have recommended Amex’s offer, which is scheduled to close next month and take effect in the second quarter of this year. The directors have also given an irrevocable undertaking to agree to sell their combined 1.33 percent shareholding in the group (of which 0.99 percent is held by CEO David Radcliffe and 0.16 percent by chief operating officer Bill Brindle).

Hogg Robinson’s largest shareholder, Boron, which holds 23.87 percent of shares, has given a similar undertaking, as has Dnata, the second-largest. Boron is the investment vehicle of John Fentener van Vlissingen, who owns another top five global TMC—BCD Travel. Dnata is a Dubai-owned sister company to Emirates and manages part of HRG’s global network.

The offer needs to be accepted by 75 percent of shareholders to be completed. Regulatory approval will also be needed in various jurisdictions, including the European Union and the U.S.

According to the offer document, there will be an expected "overall potential job reduction of between approximately 6 and 8 percent of the total combined group full-time equivalent workforce, with headcount reductions expected to be made, in particular, across corporate, service delivery, commercial, information technology and meetings, groups and events within the combined group’s various locations and geographies. It is proposed that any headcount reductions would come from across the combined group and not solely from the Hogg Robinson workforce. GBT’s and GBT Holdings’ aim is to retain the best talent from across the combined group."

Around 12,000 people work for HRG, of which 5,000 are employed directly in 25 countries, and another 7,000 work for partners in a further 100 countries. Amex GBT employs 12,000 people in nearly 140 countries.

In a prepared statement, Radcliffe said: "I am particularly excited and heartened by American Express GBT’s reassurance that it will be utilising the best talent and technology from within both organisations to create a truly world-class, leading-edge organisation, which will bring benefits to our clients, colleagues and supplier partners alike."

The offer document said the "significant opportunity to remove costs" was a key reason for Amex GBT wanting to buy Hogg Robinson, and that “certain support functions ... do not need to scale in order to achieve incremental volumes. Such functions include Global Client Solutions, Learning & Development, Quality, Service Transformation, Implementation & Workforce Management."

The offer also stated that “value of the acquisition is principally in GBT’s ability to achieve a greater global presence and better serve customers’ needs." It claimed that the two companies offer "a complementary, product range, distribution channels and geographical exposure."

Amex GBT also hinted that another reason for its interest is HRG’s independent technology. “The combined group will capitalise on Hogg Robinson’s long history of leveraging technology to attract and retain customers, evidenced by Hogg Robinson’s iSuite, online and mobile apps,” the offer said.

Amex GBT submitted its offer for HRG Sept. 7, 2017. Although the business travel industry’s usually hyperactive bush telegraph failed to get wind of the news, a deal between the two had looked a distinct possibility ever since Amex GBT was formed as a joint venture in July 2014 between American Express and the Certares consortium of investors.

With a huge war chest, the only significant acquisition Amex GBT had made until now was online booking and expense tool provider KDS. A big buy, most likely of another top TMC, seemed likely to fulfil the joint venture’s original strategic intentions, while Hogg Robinson looked the most likely acquisition target. Revenues have fallen for several years, while profit and share price growth have been limited. There was also little sign that Radcliffe, now in his sixties, and the core team around him who had managed the company for two decades had a detailed succession plan once they reached retirement age.

There is no word on what the combined group will be called, or how it will be run, but the likelihood must now be that the Hogg Robinson group name, which traces its origins to the 1840s and is one of the best-known in corporate travel, will disappear.

The final price Amex GBT pays will be determined by the timing of the disposal of Fraedom to Visa, a deal that is scheduled to take place by March 12. If Fraedom is disposed of first, Amex GBT will pay 120 pence per share. If it happens afterwards, the price reduces to 110 pence per share, valuing Hogg Robinson at £376 million instead. The Hogg Robinson share price leaped from 78 pence to 117 pence on this morning’s news.