Hotelbeds sponsor Cinven preps near-term exit – sources

29 January 2020 - 02:00 pm UTC

by Amy-Jo Crowley, Ryan Gould, Emma-Victoria Farr and Min Ho in London

 

Cinven is preparing to exit its stake in Spanish travel technology firm Hotelbeds in a process that could start as early as 2H20, three sources familiar with the matter said.



Morgan Stanley is likely to land a mandate for the process, which could be a dual-track, the sources said. The bank declined to comment.



Should Cinven decide to pursue an IPO, it is likely to hire at least one other investment bank, two of the sources noted. There are a number of banks already pitching for a role despite the lack of a formal process, one of them said.



Hotelbeds, which operates a hotel distribution platform accessed by travel agents and airlines worldwide, is “on everybody’s radar” and is an “obvious target” for an IPO due to its size, the same source added.



The firm was acquired by Cinven and the Canada Pension Plan Investment Board (CPPIB) from TUI Group for EUR 1.16bn EV in 2016.



It booked a total transaction value (TTV) of EUR 5.9bn for FY19 – a slump of 9% on FY18 values – and a 13.9% increase in pro-forma adjusted EBITDA of EUR 236.9m. Hotelbeds attributed the fall in top-line performance to some delays to integration timelines following a series of acquisitions made in 2018 and 2019, according to sister publication Debtwire.



Bedbank, the company’s B2B wholesale platform for hotel accommodation, represents 92.5% of Hotelbeds’ EBITDA, according to the same report.



Hotelbeds will have to show underlying growth of 4%-5% this year to be a convincing buying opportunity, which is possible due to the growth rate in its Bedbank business, one of the sources said.



However, underlying performance is unlikely to be the main driver behind an exit for Cinven, a banker following the situation said. Cinven has been invested in the asset for almost four years and EBITDA margins have also increased, he added.

 

Given its size and dominance in its market, the company could fetch a valuation as high as 8x-10x EBITDA, one of the sources and a second banker familiar with the company’s plans said. Australian and New Zealand travel agency Webjet [ASX:WEB], which itself is currently receiving offers from private equity suitors according to press reports, is a logical comparable, the banker highlighted.

 

Cinven is likely to prefer a full sale to maximise value, one of the sources said. Besides private equity funds, strategic parties such as Booking.com could show an interest in Hotelbeds, another of the sources and a third banker following the situation noted.



Hotelbeds is under pressure to perform now as its business model – connecting accommodation providers to travel agents – is becoming less relevant as tour operators are connecting directly to hotels, one of the bankers said.



Hotelbeds and Cinven declined to comment. CPPIB did not respond to requests for comment.