Wex agreed to buy fellow business-to-business payments firm eNett and transaction optimization company Optal for a combined $1.7 billion. That includes $1.275 billion in cash and 2 mIllion shares of Wex stock.
Enett is a joint venture majority owned by Travelport, with Optal (formerly PSP International) a minority owner. Enett offers virtual payment solutions for travel agencies and suppliers in 58 currencies (including local settlement support for 20) and integrates with booking platforms. Enett also works with Cornerstone Information Systems. The company has an “exclusive long-term partnership” with Mastercard Worldwide to allow acceptance of eNett virtual account numbers anywhere Mastercard is accepted.
Dating back to before its current owners paid $4.4 billion for Travelport, analysts had expected the GDS company to sell its stake in eNett. That it has an agreement to do so doesn’t solve the company’s tech modernization challenge. “If the Travelport owners sell eNett for $1 billion at the high end, they’re still into the GDS company for $3.4 billion,” said an industry source familiar with the company who requested anonymity during a conversation last week because of a lack of authorization to share information about Travelport. “The cash flow can’t pay down debt so you have to grow profitability to change that game. It’s not clear how.”
Most of Wex’s business is generated the United States, but the acquisitions will grow its positions in Europe and Asia/Pacific. Executives expect the deals to accelerate Wex’s business with online travel providers.
“The combination of Wex’s travel business with eNett and Optal further strengthens our leadership in the global travel marketplace,” according to a statement attributed to Wex CEO and chair Melissa Smith. “We are confident this transaction will enable us to accelerate our growth by deepening and expanding our position in the global travel market, broadening our product offerings to more fully address the needs of our travel customers, and diversifying our business geographically while reducing our exposure to macroeconomic factors.”
During a Friday conference call with equities analysts, Smith said she expected eNett to maintain a relationship with Travelport. She did not address a question about whether the sale opens up opportunities with other GDS providers. Sabre works closely with Conferma. Amadeus collaborates with Barclaycard, U.S. Bank and others on payment services, according to a spokesperson for the GDS company.
Wex is traditionally a fuel card provider to fleet operations. For example, it provides fleet cards to government workers through the GSA Smart Pay platform in partnership with Citi.
During the past several years, Wex has grown its business in travel, particularly among online travel agencies. Expedia and other travel companies book rooms with hotels using Wex virtual card numbers. Wex partners in corporate travel include Grasp Technologies and Troovo. The company powers commercial v-card solutions for American Express and Visa. Wex claims more than $35 billion processed annually through its travel and corporate solutions. Enett and Optal would add about $20 billion, according to Wex.
Virtual cards limit fraud, provide spending controls, ease reconciliation and make more corporate payment options available to non-employee travelers.
Officials expect the transactions to close in mid-2020, subject to regulatory approvals and closing conditions.
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