Travelport tests lower IPO price: fund managers

LONDON (Reuters) - Airline ticketing firm Travelport is testing investor appetite by lowering its initial public offering (IPO) price range by a quarter, fund managers said, trying to rescue its $1.78 billion London listing.

The private equity-owned group on Wednesday slashed the price range for the listing, which would be the biggest in London for almost two years, to between 180 pence and 190p per share from 210p to 290p previously, fund managers said.

But no official revised term sheet setting out details of the deal has been sent yet, sources close to the deal said.

The company declined to comment.

“I wouldn’t be surprised if they come in at this level. But even at this level, it looks difficult in the current market conditions,” one fund manager said.

The deal, arranged by Barclays Capital, Credit Suisse, Citi , Deutsche Bank and UBS, is due to close on Thursday.

Books for the listing have not been covered so far, one of the fund managers said.

“People are still unsure of what’s going on in the market, it has been quite volatile,” a fund manager said.

Travelport has also tweaked its remuneration policy to cut the amount directors and staff would receive if operating profit growth reaches targets which the company has set, according to fund managers and a source familiar with the situation.

But investors targeted to participate in the listing said the bonus package change had not gone far enough and failed to ease more fundamental reservations about the company.

“This one-page addendum that we received yesterday only makes the whole thing worse. The more you look into it the more generous the scheme seems,” said one UK fund manager.

Under a previous plan in the offer document, management and staff would receive as much as $33 million if Travelport’s 2010 earnings before interest, tax, depreciation and amortization (EBITDA) tops $662 million and an additional $24 million at over $708 million.

In a revised version, the amount payable over $708 million has been cut to a maximum of $8 million. It has not made any change to potential windfalls for over $662 million.

Travelport’s EBITDA is estimated to reach $631 million in 2009 and between $630 million and $660 million in 2010, according to analysts.


The fund manager added: “It doesn’t improve things at all and it doesn’t really make us want to invest in Travelport any more than we did in the past. Without a doubt, the scheme is still generous.”

Another fund manager said: “Travelport seems to be stuck in the departure lounge and it’s certainly going to be very difficult to get this one away,” while a third said: “If the book was going well, they wouldn’t have made the change.”

Some fund managers have said they are not interested in the offering due to the poor performance of recent IPO stocks.

“Some of the recent IPOs have been of very poor quality, Rusal, Taminco. This normally happens at the end of the issuance cycle, not at the start,” said a fund manager.

UK asset manager Gartmore has fallen 16 percent since its $553 million listing in December, while Taminco was scrapped and UC Rusal shares have dived 19 percent since a $2.2 billion dual listing in Hong Kong and Paris last month.

Travelport’s IPO is rated “avoid” by London-based Independent International Investment Research.

“We do not expect significant return from the offering over our six to 24 month investment horizon,” wrote IIIR analysts Ujwal Shah and Fathima Khan, who value Travelport shares at 266 pence.

U.S. private equity house Blackstone and Technology Crossover Ventures (TCV) bought Travelport for $4.3 billion from conglomerate Cendant in 2006.

Blackstone, whose 70 percent stake will fall to around 40 percent after the flotation, put in $775 million in equity and has already extracted a healthy return, collecting most of a $1 billion special dividend in 2007.

The private equity group will also receive $49 million in advisory fees from the IPO.

Editing by David Cowell and David Holmes