Corporate Travel Management is set to increase its US footprint by purchasing a Texas-based travel firm for a potential $53 million.
The ASX-listed travel planner said it will pay an initial $26.5 million for US company Corporate Travel Planners Inc, with an additional $26.5 million contingent on clearing profit hurdles.
The deal will become effective on January 1.
Corporate Travel said the acquisition is expected to increase annualised total transaction volume in North America to more than $2.2 billion via CTP’s strong links to the US university and education sector.
Total transaction volume for North America in FY19 was $1.46 billion of a total $6.46 billion for the group, already making it the company’s second largest segment behind Asia.
“Combined, we will forge a strong service proposition to the University and Education sector that will contribute strongly to the company’s future growth in North America,” Corporate Travel managing director Jamie Pherous said in a release on Tuesday.
The cash component of the CTD purchase – 90 per cent of the initial $26.5 million layout – will be funded by short term debt and cash flow.
CTD is expected to deliver a pre-tax contribution of $2.2 million in Corporate Travel’s FY20 results.
The company last month confirmed full-year underlying earnings guidance of between $165 million to $175 million despite “patchy client activity” in Australia and New Zealand and disruption in Hong Kong.
Corporate Travel lifted underlying earnings 20 per cent to $150.1 million in FY19, adjusted for non-recurring costs, while net profit rose by 12 per cent to $86.2 million.
Shares in Corporate Travel were down 0.1 per cent at $20.71 by 1025 AEDT following the news, and have dipped 3.4 per cent in 2019.