Aussie travel giant acquires 51% in Friends Globe

In one of the biggest acquisitions in the Indian travel industry, Flight Centre Limited, an Australian travel company with a turnover of over $5 billion, has acquired a 51 per cent stake in New Delhi-based Friends Globe Travels for an estimated Rs 60 crore.

Flight Centre has an option to buy the remaining stake by 2010, based on certain performance factors which might put the total cost of acquisition at Rs 150 crore.

The deal is one of the biggest in the burgeoning Indian travel industry after Swiss-based Kuoni acquired Sita Travels for Rs 125 crore about five years ago.

Friends Globe currently has a topline of Rs 370 crore with margins of Rs 14 crore and with this majority stake sale a new firm, FCm Travel Solutions, is being set up to tap the staggering Rs 12,000 crore travel industry in India.

Friends Globe's focus has been on the Rs 9,000 crore corporate travel sector and with this deal it hopes to spread its wings in the Rs 2,700 crore retail travel market and hopes to close next fiscal at Rs 700 crore. Estimates indicate a 12-13 per cent growth for the sector over the next year.

FCm Travel also announced massive expansion plans in the south making Bangalore its southern headquarters as more and more foreign airlines are making a beeline to bag landing rights here.

"Northwest Airlines, Delta, Gulf Air, Air France and a host of others are already here or are in the process of coming here. This opens a massive opportunity for travel solution providers like us. Currently, we have 10 commercial centres and we plan to increase this number to 25 by the end of next year," said Rahul Nath, CEO, Friends Globe.

Added Howards L Stack, director, Flight Centre: "The deal gives us a solid footing in the vital Asia-Pacific region and a strong presence in one of the world's fastest growing travel markets. With more and more MNCs moving into India, there is increasing demand for business travel managers who can provide both regional and global services. The deal will certainly create value for our shareholders on a global level and will ensure an opportunity for sustainable growth. ."

In addition to the deal, Flight Centre is also mulling to move its software development and call centre activities to India. "We will most probably outsource our IT management to an Indian company and we will handle the call centre on our own from India," Stack indicated.