Flight Centre Travel Group to Acquire Two Businesses in New Zealand

The Flight Centre Travel Group (FLT) is set to
increase its leisure and corporate travel market-share in New
Zealand through the
acquisition of the following two businesses:

– Travel Managers Group (TMG) is
a predominantly leisure-focused group that provides systems and
support services to a network of more than 180 individual brokers.
TMG also operates a 22-shop franchise network, which includes 12 TravelSmart shops and 10 non-branded stores; and

– Executive
Travel Group (ETG), one of New Zealand’s largest independent corporate
travel management companies.

has agreed to acquire 100% of both businesses and will use company
cash to fund the acquisitions. The acquisition prices have not
been disclosed but are in line with FLT’s normal transaction
multiples. In addition to an upfront payment, the ETG deal
includes additional performance-related payments that the owners
will be entitled to if the business achieves future profit-related
targets. The deals are expected to formally settle during the
first quarter of FY18.

 The addition of ETG consolidates
FLT’s position as one of New Zealand’s largest corporate travel
management companies, while the TMG acquisition will give FLT a
strong broker and franchise network to complement its omni-channel
leisure offerings.

FLT managing
director Graham Turner said the acquisitions would strengthen
FLT’s New Zealand operation, which was now the company’s fifth
largest business globally by sales behind Australia, the USA, the
UK and Canada.

“Executive Travel and Travel Managers are
profitable businesses, generating earnings before interest, tax,
depreciation and amortisation in excess of $NZ3million annually,
with solid growth trajectories and good track records of success,”
he said. “With their addition, Flight Centre New Zealand will
go close to becoming a $NZ1.5billion-per-year sales company during
the 2018 fiscal year (FY18). ETG will enhance our already
strong corporate travel offering in New Zealand and will give the
business additional scale and expertise. Through TMG, we will
gain access to new business models and leisure revenue streams to
complement our offerings across our other key channels, which
include online, contact centres, our community and flagship shop
network and our expo and event program.”

FLT has previously flagged its
intention to expand in the broker or home-based sector within its
key travel markets globally as part of its ongoing leisure travel
improvement strategies.

TMG is the company’s first acquisition
in the sector. Further expansion is planned via a combination of
acquisitions in some countries and organic growth.

home-based or broker offering has strong growth potential and is
attractive to us for a number of reasons,” Mr Turner said. “In short, it will deliver:

• Access to a talent pool of highly
experienced travel experts in a growing segment of the market;

Greater flexibility and new career opportunities for our sales

• Added convenience for our customers, which is line
with our strategy of making it easy for customers to buy from and
interact with our brands;

• Greater efficiencies, as the
home-based or broker model has a lower cost base than a
traditional shop; and

• New distribution channels for our
manufactured products, which includes a rapidly expanding range of
unique airfares, packages and in-destination offerings.

“We look
forward to working together with TMG to deliver exciting new
opportunities, services, benefits and products to its network of
expert sales consultants and their customers.”

TMG was established in 2002 and generated about
NZ$120million in total transaction value (TTV) during its 2017 year.

ETG was established in 1978 and generated about
NZ$60million in TTV during the 2016 calendar year.

businesses were privately owned, with former FLT New Zealand
employee Kevin Weston co-owning ETG and being a major shareholder
in TMG.

Mr Weston and his business partners, Nicola Jamieson
and Dave Wallace, will continue to oversee both businesses’
day-to-day operations and will report to FLT New Zealand managing
director David Coombes.

“With the combination of FLT’s greater
technology and product offering and TMG and ETG’s expertise in the
broker, leisure and corporate models, this new partnership is an
exciting strategic move,” Mr Weston said. “We look forward to working in the
business and seeing it develop and evolve. We know that through
this partnership TMG and ETG will become even stronger businesses
and help support FLT’s continual market share growth, providing a
bright future for all stakeholders.”

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