Game Over? Not by A Long Shot As AOT Group and Wotif Spark...

Game Over? Not by A Long Shot As AOT Group and Wotif Spark Bidding War for Travel.com.au


By Martin Kelly, Editor, Travel Trends

A WILD card in the shape of the AOT Group has emerged as a dark horse in what may now be a three-way fight to buy travel.com.au. AOT yesterday revealed it has accumulated a 7.74% stake in TVL, buying into the company at up to 63 cents a share – an extremely bullish price and way more than either of the two “official” contenders – Wotif.com and Webjet - have offered shareholders for control of the company.

AOT, one of Australia’s largest privately-owned travel companies with online brands that include needitnow.com.au, has made no comment on its intentions, but one thing is for sure – it will have a huge say in determining the future of what has become Australia’s most sought-after travel company – owner of the travel.com.au and lastminute.com.au sites. TVLS’s value has increased from A$33m to at least $50m in less than a month.

And to think that just three week ago Webjet looked home and hosed at 42 cents a share. A day or two after making that offer, ever-modest Webjet boss David Clarke considered the deal a fait accompli, outlining a future where online retail rivals wouldn’t stand a chance, telling Travel Today that “the combined entity will open up a large lead over Flight Centre and a ‘huge gap’ over the rest”.

“It will be game over”, Clarke said.

Clarke should have known better – the game is far from over. That first become obvious on Friday when TVL said it had been approached by an unnamed suitor, which turned out to be online accommodation powerhouse Wotif.com.

Wotif, the true giant of Australian online travel retailing with a 06/07 full year after tax profit of A$26m, is offering TVL shareholders 50 cents cash per share or the equivalent in Wotif shares. Webjet’s current 42 cent bid comprises 10 cents cash and the rest in Webjet shares. The TVL board, which initially recommended the Webjet bid, has told its shareholders to sit tight, while it is expected Webjet will shortly reveal its next steps.

Yet the irony is that Webjet may still win even if it misses out on TVL. That’s because Webjet already owns 19.9% of TVL thanks to a pre-bid agreement with TVL’s major shareholder. This means Webjet is effectively able to block the higher Wotif bid for TVL, which requires 90% shareholder acceptance.

However, you’d have to assume this action would clearly not be in the best interests of TVL shareholders and one which its board could not endorse. It would also ensure a dogfight in which no one really wins.

Assuming no further developments, taking the Wotif cash for its TVL holding may be the best option for Webjet, giving it an immediate multi-million dollar windfall. Or wait for a higher bid and take that if it arises. Of course, that would mean Webjet is back where it started, as an efficient airline booking engine, though with more money in the bank.

Still that would be better than risk paying over the odds for TVL – which Webjet wants because gives it a couple of new sites and entrée via lastminute.com.au to the much more profitable world of online accommodation retailing.

As for Wotif.com, its bid could be interpreted a number of different ways. It provides diversification, takes a potential competitive threat (lastminute.com.au) out of the picture, and opens up further distribution channels for its accommodation product.

It also allows the company to gain a better understanding of the entire travel industry, while giving it the opportunity to start selling air via the TVL-owned Arnold booking engine on its own site.

For now, Wotif COO Robbie Cooke is saying: “We are excited about the opportunities that will arise from combining both companies – we will be able to significantly enhance TVL’s accommodation offering and be able to explore avenues to leverage off TVL’s other products.”

One thing Cooke isn’t saying is: “Game over”.

Travel Trends: October 3, 2007


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