The UK’s Competition and Markets Authority (CMA) has officially approved American Express Global Business Travel’s (Amex GBT) $570 million acquisition of CWT.
However, the deal still faces legal obstacles in the United States, as the Department of Justice (DOJ) has filed an antitrust lawsuit seeking to block the merger.
CMA Approval and Findings
In its ruling, the CMA determined that CWT has weakened significantly as a competitor and is likely to continue declining. The regulatory body concluded that the merger would not lead to a substantial reduction in competition within the global business travel agency sector, citing the presence of strong competitors such as BCD Travel, FCM, CTM, and Navan.
Martin Coleman, chair of the independent panel overseeing the investigation, stated:
“Having reviewed all the evidence thoroughly over the course of our investigation, we have concluded, given the weaker position CWT plays in the corporate travel market and the alternatives available, that this deal should be allowed to proceed.”
The CMA’s report emphasized CWT’s ongoing financial difficulties, noting that its market position is unlikely to improve. It also highlighted that Amex GBT and BCD Travel remain the dominant competitors in the industry.
US DOJ Lawsuit and Future Legal Proceedings
While the CMA has cleared the acquisition, the US DOJ has taken a different stance. In January, the DOJ filed a lawsuit to block the merger, arguing that it would reduce competition and potentially lead to higher prices for corporate travel services. A trial has been scheduled for September 2024.
Amex GBT responded to the DOJ’s lawsuit, asserting that the DOJ’s case is based on an outdated understanding of the industry and overlooks the rise of numerous competitive players. Eric J. Bock, Amex GBT’s Chief Legal Officer and Global Head of M&A, stated:
“This decision by the CMA reinforces our belief that the lawsuit initiated by the US Department of Justice is fundamentally flawed, taking a narrow and outdated view of competition.”
Amex GBT has expressed confidence in its legal position and is prepared to contest the lawsuit in court if necessary, BTN reported.
Strategic and Financial Implications of the Acquisition
The acquisition of CWT is expected to enhance Amex GBT’s software and service offerings, benefiting customers by integrating CWT into Amex GBT’s proprietary technology, including Neo1, Neo, and Egencia. The transaction is projected to generate $155 million in synergies over three years, with significant efficiency gains.
Financially, the deal values CWT at a revenue multiple of 0.7x based on its estimated 2024 revenue of $850 million and a pre-synergy multiple of 7.6x Adjusted EBITDA. With anticipated cost savings and improved operational efficiencies, Amex GBT expects the transaction to be accretive to earnings in the long term.
Next Steps
With CMA approval secured, the deal is expected to close in the second half of 2024, pending resolution of the DOJ’s legal challenge and other regulatory approvals. Both companies have reaffirmed their commitment to completing the merger, citing its potential to create greater value for customers, employees, and shareholders.
As the legal battle unfolds in the US, industry stakeholders will be closely monitoring developments, as the outcome could shape the competitive landscape of the corporate travel sector for years to come.
