Bloomberg News reported earlier this week that Orbitz was up for sale. The online travel agent has tapped Goldman Sachs to run a process, press reports said.
The auction has drawn interest from financial sponsors and other Internet companies,Bloomberg said.
Orbitz, which has a $1.09 billion market cap, is expected to sell for $1 billion.
Strategics are likely not interested in Orbitz, one banker said. Companies like Expedia andPriceline.com, which acquired Kayak in 2012, don’t need Orbitz, sources said. Orbitz “is more of a private equity deal,” the source said.
Chicago-based Orbitz is the smallest of the online travel players. In November, the company reported that its third quarter net income fell 30 percent to $9 million. Adjusted EBITDA was $46.7 million for the time period. Third quarter revenue grew 15 percent to $253.1 million.
Potential private equity buyers include TPG, Vista Equity Partners, TA Associates, Technology Crossover Ventures, Warburg Pincus, the Carlyle Group, One Equity Partners and Goldman Sachs Capital Partners, sources said.
TPG is known for its airline deals, with founding Partner David Bondsman having reportedly made 12x his investment in Continental Airlines.
Vista, which just closed a $5.8 billion flagship fund in October, owns Lanyon, a software provider for the hospitality and travel industry. Carlyle has invested in the travel space and acquired Bonotel Exclusive Travel in 2014.
In 2006, Blackstone and TCV acquired Travelport, parent of Orbitz, in a deal valued at $4.3 billion. Blackstone and the buyers reportedly invested $900 million equity into the transaction, which included Orbitz. Just months after buying Travelport, the firms loaded the company with $1.1 billion in debt to fund a dividend payable to the owners.
Before the sale, Orbitz in 2006 did not have any outstanding debt, according to SEC filings. Orbitz became “obligor” for $850 million of that debt that was payable to Travelport in January 2007, SEC filings said.
Orbitz went public that May and used about $530 million in proceeds to pay off some of loans and to fund the dividend, SEC filings said. Orbitz ended 2007 with about $600 million of outstanding debt, regulatory filings said.
The company, as of Sept. 30, still had a balance of about $448.9 million in loans, a regulatory filing said. Blackstone currently owns about 3 percent of Orbitz, a spokesman said.
With that history, would Orbitz take a chance on another PE firm?
“Why wouldn’t [Orbitz] sell to private equity if they got a good deal?” the banker said. “They’re ultimately looking for the best possible deal.”
Orbitz, TPG and Goldman declined comment. Executives for Blackstone, Vista, TA, TCV, Warburg, Carlyle and One Equity couldn’t be reached for comment.