☀️☕️ Revenge Business Trips! AmexGBT+CWT

📊 Also: Trump wins in court (for time and lower bond); Novo Nordisk’s cardiovascular disease push; Yen slides; PCE on Good Friday 🎓 Stock and Cash Acquisitions

Editors note: Due to unforeseen circumstances The MoneyFitt Morning will be taking a break from Friday, 29th March, with a return TBD. We hope you enjoy the remaining issues from us this week and have increased your knowledge of the investing world during our newsletter venture.

📈 Market Roundup [26-March-24]

US large-cap S&P 500 closed 0.31% DOWN 🔻

Tech-heavy Nasdaq Composite closed 0.27% DOWN 🔻

Pan European STOXX Europe 600 closed 0.04% UP ▲

HK/China's Hang Seng Index closed 0.16% DOWN 🔻

Japan's broad TOPIX closed 1.26% DOWN 🔻

📝 Focus

  • Revenge Business Trips! AmexGBT+CWT

📊 In the Markets

  • Trump wins in court (for time and lower bond); Novo Nordisk’s cardiovascular disease push; Yen slides; PCE on Good Friday;

📖 MoneyFitt Explains

  • 🎓 Stock and Cash Acquisitions

💸 Personal Finance Corner

📝 Focus

Revenge Business Trips! AmexGBT+CWT

American Express Global Business Travel (AmexGBT) has announced a $570 million acquisition of rival CWT (formerly Carlson Wagonlit Travel), a major move in the corporate travel industry's consolidation, which is driven by the need for scale as well as demand for ever more advanced digital tools in travel management. The stock and cash transaction🎓 is expected to close in the latter half of 2024. 

AmexGBT, the world's third largest travel agency, will integrate the fifth largest player, CWT's 4,000 clients, to its existing base of 20,000 corporates, which includes major names like Google and Bank of America. The acquisition reflects both the pressure to compete with the industry crushing Online Travel Agents (OTAs) as well as (presumably) AmexGBT's confidence in the post-pandemic rebound of business travel. Industry forecasts suggest a return to pre-pandemic spending levels by 2024, even though large airlines are reporting a downturn in corporate spending, which may direct more to use the OTAs. 

“Revenge travel” in business trips was also seen in the surge in leisure travel once restrictions were lifted, but it too hasn’t fully returned to pre-pandemic levels yet. According to the UNWTO World Tourism Barometer, international tourism ended 2023 at 88% of pre-pandemic levels, with approximately 1.3 billion international arrivals.

Business class can’t, either - Image credit: Tenor

..... ▷ Business travel agencies serve corporate clients, streamlining travel for business purposes. They act as intermediaries between companies and travel service providers, handling flights, accommodations, and ground transportation. 

They make their money from commissions, service fees, markups, and specialised services to generate revenues, but Online Travel Agencies (OTAs) operating as internet platforms emerged over the past two decades to become a massively disruptive force in the travel industry and revolutionised how both leisure and business travellers research, compare and book trips. 

The first online travel agency was Microsoft Expedia Travel Services, which appeared in 1996 and marked a pivotal moment in the industry. By harnessing technology, the OTAs built transactional websites and evolved their business models, with multiple mergers and acquisitions along the way as the industry consolidated. Global crises, such as 9/11 and the 2008 recession, further accelerated their impact on airline tickets and hotel distribution. Today, giants like Expedia, Priceline Group and Trip.com (Ctrip) dominate the OTA and travel landscape.

..... ▷ As of 2023, by far the biggest of the largest travel agencies based on sales are OTAs:

  1. Booking Holdings, which includes well-known brands such as Booking.com, Priceline, Agoda, Rentalcars.com, Kayak and OpenTable. In 2022, their sales reached $121 billion. 

  2. Expedia Group, which manages brands like Expedia, Hotels.com, Orbitz, Travelocity, Vrbo, Trivago and Hotwire. 2022 sales totalled $95.1 billion. 

  3. American Express Global Business Travel (GBT), with 2022 sales of $23 billion focused on business travel spend. In 2003, American Express Global Business Travel acquired Rosenbluth International, merging two top global travel agencies. In 2014, American Express divested its Global Business Travel division for $900 million to an investor group, creating Amex GBT but retaining 50%. In 2022, Amex GBT went public through a merger with a SPAC run by Apollo Global Management and is now listed as $GBTG. 

  4. Privately held BCD Travel with sales of $16 billion in 2022. 

  5. CWT (formerly Carlson Wagonlit Travel), with 2022 sales of $13.6 billion. In 2019, Carlson Wagonlit Travel (CWT), with a rich heritage dating back to the 1870s, rebranded itself as CWT. It had been formed from a 50-50 merger of two large travel agencies in 1994: the Ask Mr. Foster Travel Agency chain, later called Carlson Travel Network, and the travel agency of Compagnie Internationale des Wagons-Lits (literally sleeping car), founded in 1872 in Belgium and later acquired by French hotel group Accor.

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📊 In the Markets

The S&P 500 dipped on Monday after its strongest weekly gains of the year, with investors assessing the Federal Reserve's interest rate trajectory ahead of key inflation data. Friday's release of the Fed’s favoured Personal Consumption Expenditures price index is keenly anticipated even though markets will be shut for the Good Friday holiday.

Sales of new US single-family homes unexpectedly declined in February amid rising mortgage rates, though the market still faces a shortage of previously owned houses.

Semiconductor stocks weakened on news of China's plans to phase out Intel and AMD microprocessors from government devices. The Philadelphia Semiconductor Index (SOX) closed 0.34% lower. 

A New York appeals court permitted Donald Trump to post just $175 million to delay enforcement of a $464 million fraud judgment. Letitia James, the New York attorney general, granted Trump a 30-day grace period, which was set to expire. The ruling allows Trump 10 days to secure the reduced bond amount, averting the potential seizure of his assets by James's office. [MFM: DJT Gets SPACked]

Novo Nordisk has acquired Cardior Pharmaceuticals for €1 billion, gaining access to RNA-based therapies for heart disease. The German biotech firm offers a treatment for heart failure currently in mid-stage, phase 2 trials, addressing the root causes of heart issues. This move marks Novo Nordisk's expansion beyond diabetes and weight loss medications, signalling a strategic shift towards establishing a presence in cardiovascular disease treatment using its massive, Ozempic-fuelled cash warchest. 

European oil and gas stocks edged 0.3% higher on Monday, tracking the upward movement of crude oil prices. Global benchmark Brent Crude rose by 0.83% to $86.14 a barrel, driven by geopolitical tensions and worries about US supply. Other sectors in European markets closed mixed.

Most Asia-Pacific markets dipped on Monday amid scrutiny of regional inflation data. Investors await Tokyo's forthcoming inflation figures, considered a barometer for Japan's nationwide trends.

Japan's top currency diplomat, Masato Kanda, noted that the yen's recent weakness doesn't align with its underlying fundamentals given the Bank of Japan's recent interest rate hikes and the removal of its yield curve control policy. Despite noting that yen weakness was negative for the economy (though not its exporters) he did not indicate any plans to intervene.

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📖 MoneyFitt Explains

🎓️ Stock and Cash Transactions

In a stock (share) and cash merger or acquisition, the acquiring company uses its own private or publicly traded shares to acquire the target company's shares with a cash component. The merger must be approved by the shareholders of both companies.

Shareholders of target companies often prefer either all-cash transactions and final deals when approved often end up with a higher proportion of cash than at the initial proposal, whether hostile or benign.

The value of the target company is determined by calculating the number of shares it will receive in exchange for its own shares based on the current (or agreed) stock price of the acquiring company plus the cash. The debt of the two companies will be combined into the newly merged entity.

The surviving legal entity is usually, but not always, the acquiring company, with the merged entity conducting business under its existing structure, while the acquired company ceases to exist as a separate legal entity. (If only one of the companies has a stock market listing, usually that will be the surviving entity.)

Often the acquiring company, the one issuing shares, will buy the target company at a premium to the target’s undisturbed share price (before the deal, or leaked rumours of the deal.)

On the announcement of the deal, the acquiring company’s share price often falls a little while the target company’s share price usually rises, which therefore affects the calculation of the value of the deal to the target company shareholders (since the ratio of acquiring companies will already be set.)

(If the purchase price is seen as "expensive" then the acquiring company's shares may fall a lot.)

💸 Personal Finance Corner

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