Travelport Ltd., the owner of online travel agencies Orbitz and CheapTickets, agreed to purchase Worldspan for $1.4 billion in cash to acquire technology and new customers.
Worldspan provides electronic ticketing for travel agencies and runs the reservation systems for airlines including Delta Air Lines Inc. and Northwest Airlines Corp. The combined company would have $3.5 billion in sales, Travelport spokesman Elliot Bloom said Thursday.
Travelport, owned by private equity firm Blackstone Group, is making the purchase to fend off growing competition in online travel. Consumers are making reservations directly through airlines' and hotels' websites instead of third parties such as Orbitz.
Travelport said it would save about $50 million by combining technology and administrative operations.
"This is a very intelligent acquisition," said Henry Harteveldt, a travel analyst with Forrester Research. "In the long run, it will make Travelport much more compelling and competitive in the travel distribution industry."
In 2001, 70% of airline reservations were processed by global distribution systems such as Travelport's Galileo, Worldspan and Sabre Holdings Corp., Harteveldt said. That's down to 50% as airlines sell more tickets from their websites, he said.
The combined company would serve more than 750 airlines and 63,000 travel agencies, Parsippany, N.J.-based Travelport said.
"There's been significant price deterioration in the industry," Travelport Chief Executive Jeff Clarke said. "It's an industry in which size and scale are important to deliver lower costs and better products to customers."
Clarke would head the combined company and Atlanta-based Worldspan CEO Rakesh Gangwal would leave after the completion of the deal, which is expected to occur in the second or third quarter of 2007.
Blackstone and Technology Crossover Ventures of Palo Alto bought Travelport from Cendant Corp. for $4.3 billion this year as Cendant split into four companies.
Travelport had revenue of $2.4 billion in 2005. Its 20 brands include Galileo, which provides ticketing services to more than 10,000 travel agents and runs United Airlines Inc.'s reservations system, Clarke said.
Most of the $50 million in savings would come from eliminating duplicate technology and other operations, Clarke said. Travelport has 8,000 employees and Worldspan has 1,720, the companies said.
Worldspan is owned by Court Square Capital Partners and Ontario Teachers' Pension Plan. It was founded in 1990.