Global travel company Webjet (ASX: WEB) is exploring a demerger with two of its companies expected to be listed on the ASX. The merger would separate its two travel divisions: WebBeds, the global bed banks business, and Webjet B2C, which includes Webjet OTA, GoSee, and Trip Ninja.
If pursued and completed, the demerger will create two standalone ASX-listed companies with leadership positions in their respective industries and distinct operating profiles, strategies and growth opportunities.
Webjet Chair, Roger Sharp, commented, “Having carefully weighed up the arguments for and against a demerger, the Board sees significant value enhancement through a potential separation of our two industry-leading businesses and brands.
“Our B2C businesses will continue to deliver organic growth through the shift to online, while separation will support our WebBeds business in its relentless focus on achieving scale in all markets in a post-pandemic landscape characterised by a reduced number of smaller competitors.”
WebBeds is a global B2B travel distribution business that acts as an intermediary connecting hotels and travel service suppliers with buyers and distributors. It has a large total addressable market and considerable growth opportunities through enhancing scale in all geographies, ongoing investment in technology and targeting new customers, travel suppliers and markets.
For customers, this could mean more streamlined and arguably more wallet-friendly booking experiences. WebBeds buyers include online travel agencies (like Webjet), tour operators, travel agents and the like. When customers book through these buyers, they are likely to get packages complete with rooms, travel arrangements, and other experiences. In doing so, they wouldn’t have to deal with multiple service providers.
Moreover, it would mean reducing the dominance of aggregators that take a servicing fee from customers. Customers would only need to work with travel agents who will take care of everything else.
In the year ending March 2023, i.e. FY24, Webjet delivered underlying EBITDA of $188.1 million, an increase of 40% over FY23. Its bookings were up 21% to 8.7 million, and the total transaction value (TTV) was up 29% to $5.6 billion. Its revenue was up 29% to $471.5 million.
For WebBeds, the TTV stood at $4 billion, with booking volumes up 26% higher than FY23. Its EBITDA was $162.4 million, up 39% on FY23.
Following the FY24 result, Webjet’s Managing Director John Guscic said, “WebBeds has become more significant to our hotel partners and travel buyer customers, selling more [products] to more customers in more geographies. And we believe there is much more to come. Our key focus going forward is on delivering our $10 billion TTV target in FY30.”
Webjet B2C comprises Webjet OTA, an Australia and New Zealand-focused consumer digital travel business with an iconic brand heritage; GoSee, a global motorhome and car rental e-commerce site; and Trip Ninja, a technology company providing solutions for complex travel itineraries.
Guscic, continued, “Our B2C and B2B divisions are increasingly diverging and have minimal operational co-dependence. B2C has seen the structural shift to online accelerate since the pandemic, leading to significant growth in market share, and we continue to see significant growth opportunities for WebBeds as a genuine player of global scale underpinned by our three pillars of growth: growing our existing portfolio, new customers, supply and markets, and driving improved conversion.”
The decision to explore the separation reflects the attractive but divergent growth opportunities available to the respective businesses. If a demerger occurs, each division is expected to gain advantages from having unique management teams tailored to its operations and competitive environments. It would also have its own capital structures, efficient capital allocation, and balance sheets to foster growth.
Moreover, they would be better positioned to adapt to the dynamic travel industry and consumer preferences, as well as attract new investors with varied investment interests.
Further details around the diverger and what WEB shareholders will receive is still to be determined as part of the strategic review with further details to be released by Webjet in due course.
Alinda is a Business Reporter for The Sentiment
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