In an acquisition put through the upheaval of the pandemic, Despegar said Thursday it would now acquire the Mexican travel agency Best Day at a discounted price.
In January, Despegar first proposed buying Best Day for $136 million. But later during the first signs of a travel downturn from the pandemic, the Argentine-based travel agency sought to renegotiate the price.
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Despegar will now pay about $56.5 million for Best Day, payable over three years without a cash outlay. The company will pay up to $20 million extra within four years, depending on additional terms tied to share price.
Best Day has cut about 40 percent of its costs through a mix of layoffs and other cost-saving measures.
The revised transaction terms require the approval of relevant authorities, expected before the end of September. The base purchase price of $56.5 million is seven times Best Day’s earnings before interest, tax, depreciation, and amortization — a measure of profit — of $8 million last year.
In 2019, Best Day booked about $140 million in revenues, with about 70 percent of its revenue generated online. About 95 percent of its revenues came from hotels or packages rather than just airfare.
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Large international travel resellers like Expedia Group will focus on their core markets rather than on Latin America, said Despegar Chief Financial Officer Alberto López-Gaffney, in a conference call with investors.
“We expect less marketing spend [by these foreign companies],” said López-Gaffney, who added that Despegar has a chance to consolidate online share in Latin America using its recognized brand name and Best Day’s strong brand.
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“As demand starts to recover, we expect a rapid build-up in domestic travel [in Mexico, relative to the rest of Latin America],” said López-Gaffney.
During the three months ending March 31, revenues for the Argentina-based Despegar declined 34 percent, year-over-year, on a currency-adjusted basis to $76.1 million.
Source: finance.yahoo.com
The Mazatlan Post