American Express Company (NYSE:AXP) announced today that it had entered into talks with Certares International Bank LLC to sell half of its business travel division with the hopes of growing the unit in a joint venture. The sale is expected to raise from $700 million to over $1 billion for American Express.
With help from Reuters, PEHub.com brought this matter to our attention. If Certares goes ahead with the move they would become fifty percent stake holders in the joint venture. American Express is expected to gain from the move and close the deal in the second quarter of 2014.
American Express would cut 5,400 jobs this year
American Express Company (NYSE:AXP) said it would cut 5,400 jobs this year, mostly in travel services, as consumers and businesses rely more on digital technology for bookings. Travel commissions and fees declined 5 percent to $495 million in the second quarter from a year earlier amid a slide in worldwide sales, the company said.
“We’ve been making strong progress in our efforts to transform our corporate travel business,” said Stephen J. Squeri, group president, global corporate services.
New York-based Certares is headed by Greg O’Hara, formerly chief investment officer of JPMorgan Chase & Co (NYSE:JPM)’s special investments group.
O’Hara has additional experience
O’Hara has additional experience as co-charmain of the Travel Leader Group, the largest travel agency company in the state. The group is made up of over 2500 agencies in 48 states. O’Hara has also been the director of a number of other travel companies.
“Certares seems to have a team of people who are very experienced in the travel industry,” Janney Capital Markets analyst Sameer Gokhale said. “Having an investor group that is willing to invest up to $1 billion in this venture would allow the operations to grow.”
Certare’s investment will allow American Express to invest
This investment by Certare into a low-margin division will allow American Express to use the cash to invest in higher margin businesses.
AmEx’s global business travel group has operations and network partners in 138 countries and serves corporate customers that spend more than $19 billion a year. Travel-related revenue at American Express Company (NYSE:AXP) totaled $1.94 billion last year, down 2 percent annually.
American Express Company (NYSE:AXP) will hold on to the entirety of its consumer travel division, and will remain independent of this proposed sale to Certare.