Can a US-based acquisition give the Corporate Travel Management Ltd (ASX: CTD) share price a boost?

Corporate Travel Management is a provider of travel management solutions to the corporate market. It prides itself on personalised service excellence and client-facing technology solutions, and these traits have helped them to win AFTA’s award for Australia’s Best Corporate Travel Management Company twelve times. Corporate Travel is currently operating throughout Australia, New Zealand, North America, Europe and Asia.

Corporate Travel’s US Acquisition

Corporate Travel Management is going to acquire Texas-based Corporate Travel Planners with a focus on the University and Education sector.

The initial purchase price is US$18 million, or $26.5 million in Australian dollar terms. This is around six times the estimated underlying net profit before tax for FY20 with the purchase price to be paid 90% in cash and 10% in Corporate Travel shares.

The cash will be funded by short term debt and cash flow.

There will be further payment of up to US$18 million or AU$26.5 million based on achievement of future profit hurdles.

Why Is Corporate Travel Making This Acquisition?

One of the main reasons is that it will increase scale in the USA with annualised total transaction value (TTV) passing US$1.5 billion, which would cement its place as a top 10 provider in North America.

Corporate Travel likes the idea of gaining more exposure to the Education sector and it’s a growth area with less exposure to economic downturns.

The main obvious reason is that it will add to Corporate Travel’s profit / earnings per share.

Management Comments

Corporate Travel Managing Director Jamie Pherous said: “CTP will be highly complementary to our organic expansion strategy and we believe that 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.”