Travelport Ltd., owner of Internet travel services including Orbitz, said Thursday it is buying Atlanta-based reservation firm Worldspan LP for $1.4 billion, a move that consolidates the travel information industry at a time of increasing competition and technological change.
Worldspan is one of four companies that collect availability and pricing information from travel suppliers like airlines and deliver it to traditional and online travel agencies.
Travelport, owned in part by the Blackstone Group, a private-equity firm in New York, already operates one of those reservation companies, Galileo International LLC.
The merger could affect Worldspan's 1,700 employees, including the 900 in Georgia. The company runs three Atlanta-area data centers that process travel requests from around the world. Travelport has 8,000 employees.
To achieve about $50 million in cost savings, the combined company will immediately look at consolidating data centers, Travelport executives said. They did not reveal specifics but said the company will also look at overlaps in its sales force and administration.
"There will be layoffs," Forrester Research analyst Henry Harteveldt said.
"On the whole it makes a lot of sense for both companies," he said. "The primary reason that they're doing this is it's a shrinking market."
The four travel companies once dominated the reservation business, but the Internet revolutionized the industry by giving consumers easy access to information and the power to make online reservations.
Travel suppliers, particularly airlines, have used direct Web bookings to bypass the four computerized reservation systems and their fees.
The four companies now process about half of airline bookings, down from 70 percent in 2001, Harteveldt said.
Acquiring Worldspan "is a critical move for us to stay competitive," said Travelport Chief Executive Jeff Clarke, who will lead the combined company.
He said Worldspan CEO Rakesh Gangwal will leave after the deal is done.
"These two complementary businesses are an ideal match to establish a leading global travel distribution company," Clarke said on a conference call with analysts. "Worldspan has a very strong technology platform and has best-in-class tools targeted in particular at online travel companies."
The two companies, together serving more than 750 travel suppliers and 63,000 travel agencies, expect to complete the deal by next fall. The companies said their boards and major shareholders have already approved it.
However, Harteveldt said U.S. and European regulators might require the companies to sell assets including Travelport holdings such as the online travel sites CheapTickets.com and ebookers.
Worldspan, working largely behind the scenes, touches millions of travelers by providing reservation services for Web sites such as Expedia, Hotwire and Priceline. It also provides reservation technology for Delta Air Lines and Northwest Airlines
Affiliates of Delta, Northwest and now-defunct Trans World Airlines once owned Worldspan. In 2003, Citigroup Venture Capital and a Canadian teachers pension fund bought the company for a little less than $1 billion.
Worldspan worked with Microsoft Corp. in the 1990s to develop the travel site Expedia, for which, until recently, it was the only processor of travel information.
While Worldspan has led in the online airline booking business among the reservation systems, it has seen that lead challenged recently.
Expedia decided in 2004 to use Sabre Holdings Corp. as a second reservation processor. Sabre, ranked No. 1 overall among the four reservation operators, owns the Travelocity Web site.
Expedia recently enacted that change and the ripples quickly spread to Worldspan, which reported last month that its third-quarter revenue fell to $212.5 million, down 11 percent from the same period last year.
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