Abu Dhabi based private equity firm Gulf Capital has acquired a 57.5 per cent stake in a Dubai-based wholesale travel agent as part of a management buyout deal.
Gulf Capital acquired the stake in Destinations of the World (DOTW), a business-to-business operator that secures bulk discounts on blocks of hotel rooms in countries around the world and then sells the bookings on to a network of travel agents, airlines and tour operators.
Under the terms of the deal, DOTW’s senior management team will own the remaining 42.5 per cent in the company.
Gulf Capital said that the acquisition tapped into current trends for consolidation across the travel industry.
The global accommodation wholesale market is estimated to be worth more than US$30 billion and is forecast to grow at about 8 per cent each year over the next five years, according to the UK-based TUI Travel.
The deal was completed under Gulf Capital’s US$533 million buyouts fund Gulf Capital Equity Partners Fund II.
Management buyouts have become more frequent in the United States this year, according to Mergermarket’s third quarter report on global mergers and acquisitions trends, with a total of 13 of the deals worth US$9.8bn. Two-thirds of these included bidders from Europe.
“Increased confidence in US-based management teams resulted in the most foreign private equity firm backed MBOs since 2007,” it said.
Overall M&A activity in the Middle East and North Africa in the year to October was 34.3 per cent lower at $13.9bn compared with the same period a year earlier, according to Mergermarket data.
The Destinations of the World transaction was funded by a combination of equity provided by Gulf Capital and the management team as well as acquisition finance provided by HSBC.
“This was our largest management buyout to date, in which we demonstrated our focus on identifying strong management teams with a demonstrated track record and partnering with them to acquire and grow a business to the next level,” said Karim El Solh, the Gulf Capital chief executive. “The accommodation wholesale sector is the fastest growing segment of the global travel market, and DOTW has a solid track record.”
Gulf Capital, which has $3.3bn worth of assets under management, is considering an initial public offering on the Abu Dhabi bourse.
lbarnard@thenational.ae
Follow The National's Business section on Twitter