(Reuters) – American Express Co (AXP.N: Quote, Profile, Research, Stock Buzz), squeezed by tighter corporate travel budgets, said it was in talks to sell half of its business travel division for up to $1 billion to an investor group led by Certares International Bank LLC.
Corporate expense accounts have come under greater scrutiny as companies look to cut costs to protect profit margins. This has hurt American Express, which gets more than a quarter of its U.S.-billed business from affluent corporate customers.
Revenue in AmEx’s corporate travel business fell 2 percent to $4.95 billion in the quarter ended June 30.
New York-based Certares is headed by Greg O’Hara, formerly chief investment officer of JPMorgan Chase & Co’s (JPM.N: Quote, Profile, Research, Stock Buzz) special investments group.
O’Hara is also co-chairman of the Travel Leaders Group, the largest travel agency company in the United States, and has served as a director of several travel companies.
“Certares seems to have a team of people who are very experienced in the travel industry,” Janney Capital Markets analyst Sameer Gokhale said. “Having an investor group that is willing to invest up to $1 billion in this venture would allow the operations to grow.”
Gokhale said Certare’s investment in the low-margin division would also allow AmEx to invest in more profitable businesses.
Certares will pay between $700 million and $1 billion for its stake in the business, AmEx said. The company’s consumer travel business would not be a part of the deal.
AmEx said the transaction was expected to close in the second quarter of 2014, and that it would recognize a gain.
The company’s shares were slightly higher at $76.16 in early trading on the New York Stock Exchange.