Who says the quick flip is dead? Not The Blackstone Group, which reportedly has filed to take Travelport public, just 15 months after buying the company from Cendant for $4.3 billion (along with One Equity Partners and Technology Crossover Ventures).
Now I know this isn’t exactly a textbook quick flip, as Blackstone & Co. will still hold a very significant ownership stake post-IPO (kind of like what happened with Hertz and its PE owners). But it’s still an example of how a PE firm can make lots of money on an investment in very little time. In fact, Blackstone essentially made back its initial equity commitment via a dividend recap earlier this year, so the IPO proceeds (and aftermarket sales) are just alpha gravy.
The IPO is expected to raise up to $2 billion, and take place on the London Stock Exchange. Travelport’s private equity backers will undoubtedly make money on the deal, but there is no guarantee that public market investors will be throwing roses at Blackstone’s feet. Sure the company’s recent numbers look good — in large part thanks to the $1.4 billion acquisition of Worldspan earlier this year — but here are three troublespots:
1. The dividend recap, which makes all non-PE folks queezy
2. The lousy IPO aftermarket performance of Orbitz, a Travelport unit that was spun out into an independent public company earlier this year (although Travelport still holds a majority piece).
3. General aftermarket of PE-backed IPOs. Worse than non PE-backed IPOs in 2007, and also worse than VC-backed IPOs.