Airline network provider Travelport Worldwide sets terms for $450 million IPO

Travelport Worldwide, which operates the third-largest global distribution system (GDS) for the travel industry, announced terms for its IPO on Thursday. The Atlanta, GA-based company plans to raise $450 million by offering 30 million shares at a price range of $14 to $16. At the midpoint of the proposed range, Travelport would command a fully diluted market value of $1.9 billion.

Other IPO Filings
Travelport originally launched a $2 billion IPO on the London Stock Exchange in 2010, but later withdrew. It is the second PE-backed GDS operator to file for an IPO this year, following close peer Sabre's (SABR) public offering in April (priced 16% below the midpoint and has traded up 15% from the offer price). Other air travel IPOs in the pipeline include Virgin America (VA) and Avolon Holdings (AVOL).

History and Ownership
Travelport was formed in 2006 when Blackstone bought complementary travel technology businesses from Cendant. In 2007, Travelport spun off Orbitz through an IPO and later that year acquired GDS peer Worldspan for $1.3 billion. In 2011, it sold Gullivers Travel Associates and reduced its position in Orbitz to 37% and, in July, to less than 1%, which begins to explain why Travelport's revenue has dropped over 10% since its 2010 IPO filing. Travelport completed a major debt refinancing in 2013 where it simplified its capital structure and owner Blackstone sold its majority stake. Primary shareholders now include Angelo, Gordon and Co. (13% post-IPO stake), Q Investments (8%), Blackstone (7%) and Morgan Stanley (6%).

Market Position
With about 25% of the GDS market, the company has lost its leading position in the past few years to Amadeus (39%) and Sabre (36%). However, Travelport highlights its strong cash flows, a superior geographical balance to peers, long-term agreements with airlines (hosts Delta Airlines' reservation and inventory management system) and a more integrated role throughout the travel value chain.

Recent Financials
Net revenue increased 4% to $1.1 billion for the six months ended June 30, 2014 as volume increased on its Travel Commerce Platform across regions. Adjusted EBITDA grew 6% to $297 million during the first half. as the company benefited from favorable foreign exchange movement. After using IPO proceeds and the sale of Orbitz to pay down its refinanced debt, Travelport will hold $2.4 billion of total debt (4.6x LTM adjusted EBITDA).

Timing and Underwriters
Travelport Worldwide, which was founded in 2006 and booked $2.1 billion in sales for the 12 months ended June 30, 2014, plans to list on the NYSE under the symbol TVPT. Morgan Stanley, UBS Investment Bank, Credit Suisse and Deutsche Bank are the joint bookrunners on the deal. It is expected to price during the week of September 22, 2014.