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Helia Ebrahimi, Richard Fletcher & Alistair Osborne
The private equity owner of Travelport pulled its $3.45bn (£2.16bn) flotation just one day before the deadline for institutional shareholders to invest in the hotel and airline booking company.
Travelport’s directors and its private-equity backer Blackstone concluded late on Wednesday that the deal – billed as the UK’s biggest IPO for two years – was no longer workable after fund managers demanded heavy discounts.
Eleventh-hour negotiations saw the original £2.20-£2.90 a share price range cut but the cash needed to pay off the company’s heavy debt burden made it impossible to sell at such a discount.
Jeff Clarke, Travelport’s chief executive, said: “Since we announced our intention to float, there has been significantly increased volatility and uncertainty in global equity markets, as a result of macro circumstances unrelated to our business.
“Travelport is a strong company with an attractive financial model and great momentum. We will consider bringing it back to the market at a future date, when equity markets are more favourable.”
The failure is a huge blow for market confidence and comes as the board of private equity-owned New Look and it shareholders discuss whether to push ahead with the fashion retailer’s float.
The Travelport flotation had been hit by market volatility and news of a generous executive incentive plan. Institutional shareholders were also cautious about buying into highly leveraged private-equity owned companies.
Travelport had planned to use the proceeds from the float to cut the company’s $4.1bn borrowings to a target net debt of $2.3bn, reducing its gearing to 3.5 times ebitda from six times today.
Wednesday’s decision could embarrass the Government of Singapore Investment Corp, which recently paid $225m for a 7.19pc stake in Travelport. Its failure will also have implications for its larger rival Amadeus, whose owners include BC Partners and Cinven, which also plans to float.
An executive at New Look, which met on Wednesday, said the company’s plans were “still on track” after a crisis board meeting.