American Express To Acquire Resy For Digital Reservations

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About: American Express Company (AXP), Includes: AIRB, V
by: Donovan Jones
Summary

American Express has agreed to acquire Resy for an undisclosed sum.

Resy has developed a consumer app and restaurant table management system.

With the deal, AXP is continuing to build out a complementary set of digital service offerings as it seeks to expand its business beyond its core financial network.

Quick Take

American Express (AXP) has agreed to acquire Resy for an undisclosed amount

Resy has developed a full suite of online restaurant reservation and table management solutions for restaurants and consumers.

With the deal for Resy, AXP is continuing to acquire fill-in capabilities to build out its offerings for cardholders in the hospitality and travel sectors.

Target Company

New York-based Resy was founded in 2014 to initially create a mobile app for consumers to reserve restaurant dining appointments.

Management is headed by co-founder and CEO Ben Leventhal, who was previously the co-founder of Eater, a national food blogging network acquired by Vox Media.

Below is an overview video of Resy:

Source: John Niedermeyer

Investors have invested at least $17 million into Resy and include Airbnb (AIRB), Union Square Hospitality Group, Lerer Hippeau, and Vayner/RSE.

According to a Datanyze, the restaurant reservations market has more than 25 technology companies offering solutions for restaurants.

The top three providers are OpenTable, Quandoo Reservation Management System, and BookaTable.

American Express has acquired other hospitality booking platforms based on their localized presence, including Mezi, a UK-based app and Pocket Concierge, a Japanese restaurant reservation system.

Acquisition Terms & Financials

AXP didn’t disclose the acquisition price or terms and didn’t file a form 8-K or provide a change in financial guidance, so the deal was likely for a financially non-material amount.

A review of the firm’s most recent 10-Q filing indicates that as of March 31, 2019, AXP had $4 billion in cash and equivalents and $102.1 billion in liabilities excluding customer deposits, of which long-term debt represented $58.4 billion.

Free cash flow for the three months ended March 31, 2019, was $8.2 billion.

In the past 12 months, AXP’s stock price has risen 16.5% vs. Visa’s (V) rise of 25.2%, as the chart below indicates:

Source: Sentieo

Earnings surprises have been positive in ten of the last twelve quarters:

Source: Seeking Alpha

Analyst sentiment in recent earnings calls hs turned upward since a recent low in the latter part of 2018:

Source: Sentieo

Commentary

AXP is acquiring Resy as part of an ongoing series of acquisitions to bolster its offerings to cardholders.

As the firm stated in the deal announcement,

The acquisition will build on the growing suite of digital-first benefits and services from American Express that extend beyond traditional rewards and points, to provide Card Members with access and experiences across travel and lodging, airport lounges, exclusive events, and dining.

Notably, Resy will continue to operate as a separate brand within AXP, led by CEO Leventhal. It is likely that AXP will integrate its capabilities at some point, assuming it wants to provide a ‘seamless booking experience’ for cardholders.

While the deal itself won’t impact AXP stock, it does point to management’s approach to expanding beyond its core payment network business into providing complementary digital services to its card members.

I expect to see further development and acquisitions as AXP continues to diversify from being a payment provider into a broader definition of financial and digital services.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.