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Is $1bn a realistic figure for a Kayak IPO?

09/29/2009| 9:11:51 AM| 中文

Suddenly, with the credit and stock markets thawing a bit, a slew of travel companies may be talking to investment bankers and testing the IPO waters.Consider that the Boston.com reported that Kayak is talking to investment bankers about going public.

And, Reuters disclosed that the private equity and airline owners of Amadeus,  the global distribution system and technology company, hired an investment bank to mull taking the company public.

Meanwhile, Blackstone’s Travelport, the parent company of Orbitz Worldwide and the Galileo and Worldspan reservations systems, has sent invitations to the banking crowd to bring their PowerPoints over to headquarters to describe how they would nail down the details of a possible listing on the London Stock Exchange, according to The Independent.

So, what’s going on here?

Jake Fuller, lodging and e-travel analyst for Soleil Securities, says investment banking activity is picking up and the IPO pipeline is getting filled. Deals that were on the table prior to mid-2007 and abandoned, are being reconsidered, he adds.

The structure of any deals, the controlling interests, the assets impacted and untouched — all of these issues will have to await the fine print if the privately held companies in question go ahead and venture into the public markets.

But, a potential Kayak IPO has a lot of industry people talking. Kayak itself declined to comment, citing regulatory restrictions.

 “I know they have been thinking about going public for awhile,” says a C-Suite official at one of Kayak’s competitors, who is plugged into venture capital circles. “I will be surprised if they get out in 2010 as it’s still going to be a tough year and their profitability is going to make it difficult in that sort of market. I think they are interviewing banks now.”

This same official, and another competitor, spoke of rumblings that the size of a Kayak IPO could be very large given Kayak’s lofty valuation when it closed its last round of financing in 2007.

I hear numbers like $1 billion being tossed around in conversations.

Sam Shank, the CEO of DealBase, concurred with the line of thinking that a Kayak IPO could be in the offing.

 “Based on the valuation of the last money into Kayak, an IPO is the only realistic exit for the company that would deliver adequate returns to Kayak’s investors,” Shank says.

Some people, such as Tom Botts, the managing partner of Hudson Crossing, believes “the timing is right” for Kayak because search traffic is rising while online travel agencies and GDSs are indicating that the ranks of lookers are swelling, making bookers look like something akin to the nerdy kid in the corner of a crowded classroom.
“Kayak is right in the sweet spot,” Botts says.

Others aren’t so sure about the timing. A top exec at one distribution company chimed in: “Maybe Kayak believes it sees a window. I don’t see a window.”

Shank of DealBase sees a re-energized Kayak emerging from an IPO. It would bring “validation and market awareness that happens with a public offering,” Shank says. “A recent good example of this is OpenTable. This would help Kayak’s market share and audience development.”

Going public would also give Kayak the “currency [in cash and stock] to do acquisitions,” with a likely focus on international markets, Shank says.

In that regard, perhaps Kayak could buy a competitor in Europe to get things rolling over there.

Shank believes Kayak could also use its new-found wealth to make “some hostile bids for under-performing, public travel-media companies.”

And, Kevin Fliess, the CEO and co-founder of TravelMuse, sees the fallout of a Kayak IPO as wafting over much of the travel technology sector. He thinks it might portend “the beginning of the thaw.”

Says Fliess: “I think it would be very positive for the travel technology segment and the Internet sector as a whole. More liquidity is needed to fuel innovation and such an event would allow Kayak to be more aggressive in its development and expansion efforts. But, it would also signal to the capital markets that there’s a lot of money to be made in travel and that new models are emerging that really do generate shareholder value.”

Meanwhile, the controlling shareholders of Amadeus – BC Partners and Cinven – as well as minority airline shareholders Air France, Lufthansa and Iberia, may be seeking to take the once-public, but now privately held GDS and technology firm, public again in Madrid.

After all, building a common IT platform for the Star Alliance and other carriers doesn’t come cheaply.

One Amadeus official in the know signaled that reports of a possible Amadeus IPO are more likely to be accurate than not.

So, with all of the global distribution systems now in private hands, the balance might be tipping in the other direction given the reports of possible Amadeus and Travelport public offerings.

The airlines’ woes and the recession have muted the growth of GDS transactions and made this past year a very difficult one for online travel agencies and virtually the entire travel industry. So, perhaps the private-equity owners of Amadeus and Travelport will now seek ways to extract some cash from the public markets as the economic climate improves.

Using its best corporate-speak, Travelport had the following to say about reports of its embarking on investment banking interviews.

“As a privately-held company, we continually explore, prepare for and evaluate possible corporate transactions to ensure we have the most efficient and effective capital structure and to maximize the value of the enterprise. As previously announced, the Company will not rule out any corporate transaction, including an initial public offering, which could benefit the Company and its stakeholders. No assurance can be given with respect to the timing, likelihood or effect of any possible corporate transactions.”

The only major entity among this group which we haven’t heard a peep from is Sabre, the owner of Travelocity, lastminute.com and GetThere.

Will Sabre’s private equity owners be content to stay behind the curtain in the private sector for long if the IPO market picks up?

Might there not be an asset or two over in Sabre land to spin off if the price is right?
TAGS: Kayak | IPO
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