18 December 2015

CTM lifts US market share with California acquisition

Leading Australian travel provider Corporate Travel Management (CTM, ASX: CTD) is expanding its US footprint with the acquisition of California-based Montrose Travel, announced today.

The purchase is expected to make CTM one of the 12 largest travel companies in the US, just three years after entering the market.

The company’s total transactional value in North America is now expected to exceed $1 billion in the 2016 calendar year following the $47.6 million ($US34.32m) purchase.

CTM has upgraded its profit forecast to $68 million for this financial year, with previous EBITDA guidance in the range of $61.3m-$63.8m.

This guidance reflects the continued execution of CTM’s strategy and a six month contribution from Montrose Travel of approximately $4 million to this financial year.

CTM founder and managing director Jamie Pherous said the acquisition met the company’s strict criteria for acquisitions and followed 12 months partnering with Montrose Travel on programs and client services.

“We have consistently said to the market and our industry that we would pursue acquisitions where they make our business stronger, and deliver compelling customer benefits,” Mr Pherous said.

“When we expanded into the United States in 2012, we made it clear that acquisition opportunities would be assessed to determine whether they showed cultural compatibility, integration simplicity and quality management.

“Montrose Travel epitomises that approach; it is an iconic business in California, operating for more than 60 years.

“They possess a capable and passionate management team, are leaders in travel in their region, enjoy high client and staff retention, and will have significant ownership in CTM via CTD stock.”

Mr Pherous said the acquisition of Montrose Travel would establish a Californian hub, growing business in a strategic North American market.

“Together with our well established businesses in North America, we can significantly improve our offering for local, regional and global clients.”

The acquisition will be funded through stock, with the balance (80 per cent) paid from operating cash flow from the US business and short term debt.

CTM forecasts the Montrose Travel business will contribute $4 million in EBITDA in financial year 2015-16 ($8 million on an annualised basis), with six months of trading from the effective date of 1 January 2016.