After weeks of on-off talks, Helloworld and AOT Group Limited have agreed to merge with the aim of creating a travel company that is “larger, stronger and more competitive” with AOT founder and chief executive Andrew Burnes at the helm.
Helloworld will acquire the privately-owned operator for $25 million in cash and a consideration of 218.7 million HLO shares which will give the vendors of AOT 40% of HLO at completion when combined with their existing shareholding. With the current share price at $0.33, that takes the total value of the deal to around $97m.
Burnes raised his shareholding in the Qantas-backed group to 10.3% in April this year.
The merger will create a “diversified” travel business, according to Helloworld.
“AOT brings significant strength in inbound and wholesale travel management and accommodation program management and will bolster HLO’s existing retail, wholesale and government travel businesses,” a statement said.
Talks between the two parties were originally flagged in September, but then quickly stalled with Helloworld announced it has been “unable to reach agreement with the AOT shareholders on acceptable terms”, and terminated discussions, prompting AOT to contemplate an IPO.
However, shareholders were said to be in favour of the deal which would create a significantly strengthened business. AOT generated revenue of $55.8 million and underlying earnings of $14.3 million in the 2015 financial year. The same period saw Helloworld finish up with an adjusted profit before tax of $6.9 million, a solid jump on the FY14 loss of $1.7 million.
Burnes will take up the position of Helloworld chief executive and managing director upon completion of the deal, with Jenny Macdonald to act in the role in the interim. Elizabeth Gaines had already confirmed her intention to depart the company by the end of this year. AOT co-founder Cinzia Burnes will become executive director.
The deal is conditional on the approval of HLO shareholders at an extraordinary general meeting to take place in January.