Sabre's Travelocity Takeover Bid Draws Sharp Retort

Travel giant Sabre Holdings Corporation (NYSE: TSG) Tuesday announced that it has commenced a cash tender offer for all outstanding common shares of Travelocity.com (Nasdaq: TVLY). Texas-based Sabre currently owns nearly 70 percent of the online travel site.

Sabre is offering US$23 per share to acquire the balance of Travelocity common stock -- about 15 million shares -- representing a 19.8 percent premium over the stock's closing price of $19.20 on February 15th, the last trading day before Sabre announced its buyout plans.

Travelocity's Special Committee, which is comprised of independent directors, initially dubbed the $23-per-share offer inadequate but will convey its official position to the U.S. Securities and Exchange Commission and stockholders no later than March 15th.

Until then, Travelocity executives will offer no comment, observing a company-wide quiet period, a source close to the company told the E-Commerce Times.

New Reign?

With complete ownership, Sabre likely would rob Travelocity of the management autonomy it has enjoyed to date, analysts said, despite Sabre's claim that it will not alter the management or direction of Travelocity.

"The 'spin-in' would definitely give Sabre tighter control over Travelocity," Morningstar.com analyst David Kathman told the E-Commerce Times. "Sabre might try to run Travelocity for the benefit of the company as a whole, not necessarily for the benefit of Travelocity."

But Travelocity's Special Committee and shareholders will not likely look favorably upon Sabre's hostile bid, Kathman said.

Not So Fast

Indeed, upon considering Sabre's initial proposal of $23 per share, the committee raised a number of staunch objections.

For one thing, it said, the $23 offer price does not reflect the long-term value of Travelocity stock. Sabre's offer appears to be an opportunistic attempt to acquire Travelocity for a bargain price, the committee added.

While Travelocity's share price plummeted to $19.20 on February 15th amidst its ongoing market share battle with rival Expedia (Nasdaq: EXPE), the stock was trading at a much healthier $26 on March 5th.

Going forward, the committee said, it will work to protect the interests of non-Sabre stockholders of Travelocity.

Time Will Tell

Some analysts said they see merit in the committee's objections to Sabre's offer. Given the low offer terms, there is little incentive for Travelocity to proceed willingly, said Kathman, and it is unclear to outside observers why Sabre would pursue the bid in the first place.

"Even though Travelocity has had its problems, losing some market share to Expedia, I would rather own Travelocity shares than Sabre shares," Kathman noted.

Sabre's offer is conditioned on the tender of a number of shares sufficient to bring its stake in Travelocity to at least 90 percent. The company's offer commenced on March 5th and will expire at midnight on April 5th, unless it is extended.