We have been bought

Yes, it’s official now. Sabre Holdings has been bought by two Private Equity firms – Texas Pacific Group and Silver Lake partners. The deal has been valued at over USD 5 billion and as a consequence of it, Sabre (ticker symbol TSG) will be taken off the New York Stock Exchange coming quarter 2 of next year.

The move to take the company private has set off a sort of panic in our office here, with a number of people fearing for their jobs. Reports have been heard about employees saying “our company has been sold out, we’ll lose our jobs”. Thankfully, yesterday the top management of the Bangalore office called for an all employee meeting where they formally communicated to us the deal and tried to assure us that nothing is going to change.

For a start, with most of Sabre’s competitors in the ticket booking business (Worldspan, which has been recently taken over by another private competitor Travelport, etc.) being private, probably top management felt that we might be disclosing too much by being a listed firm and in that sense, a delisting was imminent. However, given Sabre’s holding structure, with a large number of owners holding small portions of the firm (in other words, without a “promoter”), the process of delisting would require that someone takes on temporary ownership. And this is where, I think, the PE firms step in.

From my personal point of view, the fact that PE firms have taken over signals that they expect our cash flows to improve significantly over the next 2-3 years, and that Sabre’s valuation in this period will grow at a rate much higher than the market rate. From the entire firm’s point of view, it sounds really good. What is not so good from my point of view is that I belong to this company called Sabre Airline Solutions (Sabre Holdings, as the name suggests, is a holding firm and has three firms – Travelocity, Travel Network and Sabre Airline Solutions under it), which is not exactly the cash cow of the group. In fact, a number of products of Airline Solutions are loss-making, and TPG has explicitly said in some news reports that they are interested in Travelocity. Given that PE firms typically will want to go in for some kind of reorganization, there is a possibility that we (Airline Solutions) might get spun off. Still, in the short term (next year or so), I don’t think there will be significant impact.

However, this is the first time I am seeing PE firms buying up 100% stake in a firm, so it is going to be interesting to see how it goes. Hopefully it will all be for the better. And I won’t lose my job!

The views expressed here are personal and do not in any way reflect the views of my firm. Also, I am nowhere near the top managemnt of my firm, so I have had no part to play in the takeover.

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