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Summary

  • Company operates in an increasingly competitive travel/tourism business without a clear competitive advantage.
  • For the last two years the all important "Total Direct Billable Bookings" metric had a negative rate of change.
  • Top line revenue grew only 2.5% in 2013 vs. 2012.

Based in Southlake, TX, Sabre (NASDAQ:SABR) scheduled an $850 million IPO on the Nasdaq with a market capitalization of $4.7 billion at a price range midpoint of $19 for Thursday, April 17, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: Morgan Stanley, Goldman Sachs, BofA Merrill Lynch, Deutsche Bank

Co-Managers: Evercore Partners, Jefferies & Co., TPG Capital BD, Cowen & Company, Sanford Bernstein, William Blair, Mizuho Securities, Natixis, Williams Capital Group

End of lockup (180 days): Tuesday, October 14, 2014

End of 40-day quiet period: Tuesday, May 27, 2014

Summary

SABR is in an increasingly competitive travel/tourism business without a clear competitive advantage.

Top line revenue grew only 2.5% in 2013 vs. 2012, to a little over $3 billion. 2013 income was up over 2012, but still less than 2011.

For the last two years the all important "Total Direct Billable Bookings" metric had a negative rate of change: -3.25% for 2013 and -.5% for 2012, trending in the wrong direction.

The private equity owner sucked out so much cash that the price-to-tangible book value is -1.6, very low (low is worse) and price-to-book value is -35. It's unusual for a company to do an $850 million IPO and post-IPO wind up with a negative price-to-book value.

Even so, the P/E at the price range mid-point of $19 is 21.5, based on 2013 adjusted net income.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

2013 yr

Cap (MM)

Sls

Erngs*

BkVlue

TanBV

in IPO

Sabre

$4,655

1.5

21.5

-35.0

-1.6

18%

*Adj net income

Conclusion

The rating on SABR is neutral.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

SABR is a leading technology solutions provider to the global travel and tourism industry.

SABR spans the breadth of a highly complex $6.6 trillion global travel ecosystem through three business segments: (i) Travel Network, its global B2B travel marketplace for travel suppliers and travel buyers, (ii) Airline and Hospitality Solutions, an extensive suite of leading software solutions primarily for airlines and hotel properties, and (iii) Travelocity, its portfolio of online consumer travel e-commerce businesses through which SABR provides travel content and booking functionality primarily for leisure travelers.

Collectively, these offerings enable travel suppliers to better serve their customers across the entire travel lifecycle, from route planning to post-trip business intelligence and analysis.

Items that are not allocated to SABR's business segments are identified as corporate and include primarily certain shared technology costs as well as stock-based compensation expense, litigation costs related to occupancy or other taxes and other items that are not identifiable with one of its segments.

Through its Travel Network business, SABR processes hundreds of millions of transactions annually, connecting the world's leading travel suppliers, including airlines, hotels, car rental brands, rail carriers, cruise lines and tour operators, with travel buyers in a comprehensive travel marketplace.

SABR offers an efficient, global distribution of travel content from 125,000 travel suppliers to 400,000 online and offline travel agents.

To those agents, SABR offers a platform to shop, price, book and ticket comprehensive travel content in a transparent and efficient workflow.

SABR also offers value-added solutions that enable its customers to better manage and analyze their businesses.

Through its Airline and Hospitality Solutions business, SABR offers travel suppliers an extensive suite of leading software solutions, ranging from airline and hotel reservations systems to high-value marketing and operations solutions, such as planning airline crew schedules, re-accommodating passengers during irregular flight operations and managing day-to-day hotel operations.

These solutions allow SABR's customers to market, distribute and sell their products more efficiently, manage their core operations, and deliver an enhanced travel experience.

Through its complementary Travel Network and Airline and Hospitality Solutions businesses, SABR believes it offers the broadest, end-to-end portfolio of technology solutions to the travel industry.

Dividend Policy

SABR expects to pay quarterly cash dividends on its common of stock $.09 per share, which is 1.9% on an annual basis at the price range mid-point of $19.

Intellectual Property

SABR uses software, business processes and proprietary information to carry out its business. These assets and related intellectual property rights are significant assets of SABR's business.

SABR relies on a combination of patent, copyright, trade secret and trademark laws, confidentiality procedures and contractual provisions to protect these assets and SABR licenses software and other intellectual property both to and from third parties.

SABR may seek patent protection on technology, software and business processes relating to its business, and its software and related documentation may also be protected under trade secret and copyright laws where applicable.

Competition

The airline software industry is very competitive and highly fragmented. SABR is currently aware of over 100 competitors providing many types of reservations systems and software applications solutions.

The closest competitor to SABR in terms of size and breadth of product offering is Amadeus.

SABR also competes with traditional technology companies such as HP, Unisys and Navitaire (a division of Accenture) and with airline industry participants such as Jeppesen (a division of Boeing), Lufthansa Systems and SITA.

In addition, various point solutions providers such as PROS, ITA Software, Datalex and Travelport compete with SABR on a more limited basis in several discrete functional areas.

5% stockholders

TPG Funds 45.2%

Silver Lake Funds 27.8%

Sovereign Co-Invest, LLC 23.3%

Use of proceeds

SABR expects to net $797 million from its IPO. Proceeds are allocated as follows:

To repay $180 million of its outstanding indebtedness under the Term C Facility portion of its senior secured credit facilities. The Term C Facility matures in December 2017 and bears interest at a rate of LIBOR (subject to a 1% floor) plus 3%.

SABR also intends to redeem $320 million aggregate principal amount of its 8.5% senior secured notes due May 2019 at a redemption price of 108.5% of the principal amount of the 2019 Notes redeemed, plus accrued and unpaid interest to, but excluding, the date of redemption.

SABR intends to use $256 million, the remaining portion of the net proceeds from this offering, to pay a $21 million fee, in the aggregate, to TPG and Silver Lake pursuant to the MSA, which will thereafter be terminated, and $235 to redeem the Series A Preferred Stock.

Disclaimer: This SABR IPO report is based on a reading and analysis of SABR's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Sabre