American Express Global Business Travel and Apollo-backed Spac reached a $5.3 billion deal

American Express Global Business Travel announced that it will merge with a New York-listed blank cheque company backed by Apollo Global Management, betting on the recovery of business travel after the pandemic.

In 2014, American Express split the company’s travel arrangements company into a joint venture, and American Express retained 50% of the shares. After the merger with the special purpose acquisition company Apollo Strategic Growth, American Express Global Business Travel (GBT) will be renamed Global Business Travel Group and listed on the New York Stock Exchange.

The transaction is expected to raise up to US$1.2 billion in proceeds, including approximately US$817 million in cash held by Apollo Strategic Growth Trust and US$335 million in public equity (Pipe) private investment, giving it a pro forma market value of US$5.3 billion.

Contributing to the Pipe part will be new investors including Zoom; tourism technology company Sabre; private equity groups Apollo and Ares Management; and investment consultant HG Vora. They will join existing shareholders, American Express; online booking company Expedia; and Certares, a boutique investment company that recently helped lead the car rental group Hertz out of bankruptcy.

GBT chief executive Paul Abbott told the Financial Times that the promise of these new investors is a “huge vote of confidence” in the company, the future of business travel, and the opportunities in the industry.

During the pandemic, the US$1.4 trillion business travel industry has been hit hard and has so far recovered more slowly than leisure travelers. The private equity firm Carlyle Group and Singapore’s sovereign wealth fund plan to acquire a 20% stake in American Express’s global business travel, which will make the company’s valuation approximately US$5 billion. collapse May 2020.

Abbott said on Friday that GBT, with travel sales of $39 billion, is the largest participant in the business travel industry, 40% larger than its closest competitor, providing it with a “huge growth runway.”

The company’s financial forecasts are based on business travel reaching 70% of pre-pandemic levels by the end of 2023. This does not mean that they are pessimistic about the prospects, Abbott said, but want to weaken some of the most optimistic forecasts and “create a bottom line for investors,” and have confidence in the potential upside.

The return of Covid-19 cases in Europe and the United States, which entered the winter in the northern hemisphere, poses the latest threat to the recovery of business travel. Multiple governments have tightened restrictions on overseas travelers As a result of the discovery of a new, highly mutated variant of Omicron.

Abbott said, “I think we are seeing the government adopt a more cautious and pragmatic approach to travel restrictions”, adding that he believes this “will not change investors’ views on the development of the industry by the end of 2023 or the end of 2024.”

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