Brazilian airline ticket consolidators turn to M&A to fight off tourism giant CVC
The recent series of acquisitions by CVC [B3: CVCB3], Brazil’s leading tourism company, has led local airline ticket consolidators to hunt for buys or outside capital to avoid seeing their market shares diluted in a sector with tight proít margins and high fragmentation, industry sources told Mergermarket.
Airline ticket consolidators act as intermediaries between airline companies and travel agencies that want to buy tickets. According to sector association AirTkt, these companies account for more than half of all îight tickets sold in Brazil.
As a way to achieve economies of scale, Sao Paulo-based CVC has carried out a series of acquisitions since 2010, when it raised about USD 393m from a majority stake sale to Washington DC-based private equity írm The Carlyle Group [NASDAQ: CG], Maryland-based PE írm RLJ Equity Partners and other co-investors. Although the PE backers later exited the business, CVC continued relying on M&A to accelerate its growth.
In September 2017, it announced the acquisition of an additional 33% stake in Rextur Advance, the country’s largest airline ticket consolidator, for BRL 179.5m (USD 53m). CVC, which already controlled 55% of the target, has the right to purchase the remaining 17% stake, according to a press release issued at the time. According to public information, Rextur Advance booked 2017 revenues of BRL 3.3bn.
During last month’s Fórum Panrotas, held in Sao Paulo, a moderator for a panel of executives, from tourism operators and consolidators, said on stage that CVC was in talks to buy Esferatur, Brazil’s second-largest airline ticket consolidator.
Mergermarket reached out to the two players. CVC said it would not comment on market rumors, while Blumenau-based Esferatur, which had 2017 revenue of BRL 2.25bn according to Panrotas, said it preferred not to comment on the matter.
Juarez Neto, CEO of Ancoradouro, the country’s fourth largest airline ticket consolidators, said in the same panel that smaller players needed to seek “strategies” to stand up to CVC.
In an interview to this news service in March, Neto said Sao Paulo-based Ancoradouro wanted to acquire peers with revenues between BRL 150m – BRL 200m to expand its geographic footprint. He noted that the company, which reported 2017 revenue of BRL 785m, had no plans to shop itself but was open to hearing from bidders.
That same month, Flytour’s CEO Christiano de Oliveira said the country’s second-largest travel company had retained a ínancial advisor to seek acquisitions of airline ticket consolidators among other types of targets. Nearly half of Sao Paulo-based Flytour’s revenues, which came at BRL 5.6bn in 2017, come from its airline ticket consolidation arm, he noted.
Flavia Pirola, director of airline ticket consolidator Tyller, said in late March that the company could consider a stake sale or a sellout. Sao Paulo-based Tyller booked revenues of BRL 200m last year, as reported.
Marco Di Ruzzi, vice president of Grupo BRT, said earlier this month that the airline ticket consolidator was planning to retain a ínancial advisor to look for smaller targets. With 2017 revenue of BRL 560m, Parana-based Grupo BRT could also consider a total sale as its founder has been contemplating retirement, he noted.
Ralf Aasmann, executive director at Air Tkt, said it makes sense for smaller players to seek M&A alternatives amidst the sector’s ongoing consolidation. Scale plays a key role in the industry, he pointed, adding that the industry’s average gross proít margin stays at between 3%-4%.
Additionally, larger players are able to offer better credit conditions to travel agencies that buy its products, Aasmann said.
The executive cautioned, however, that the most important asset for an airline ticket consolidator is its customer base and some travel agencies prefer to deal with smaller ticket providers than large ones. “These agencies like to work with providers of customized services,” he said.
Other airline ticket consolidators include Rio Grande do Sul- based SkyTeam, which generates annual revenues of BRL 762.4m; Mato Grosso-based Coníanca (BRL 733.5m); Sao Paulo-based Sakuratur (BRL 705.5m) and LTS (BRL 207.7m); and Minas Gerais-based PVT (BRL 575m); according to Panrotas 2017 ranking