Webjet Limited in trading halt ahead of giant UK acquisition

Webjet Limited (ASX:WEB) is reported to be doing another big deal in the UK.

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Webjet Limited (ASX: WEB) shares are locked in a trading halt this afternoon with Fairfax media reports suggesting the company is set to raise $200 million to acquire a UK travel business.

According to the AFR the acquisition target is UK-based business-to-business (B2B) travel operator Jac Travel. According to its website Jac Travel offers partners direct access to a digital inventory of 18,000 hotels globally and aggregated access to 165,000 hotels.

B2B travel businesses like Jac Travel and Webjet via its Lots of Hotels and FIT Ruums businesses act as digital middlemen between hoteliers and travel agents looking to book hotel rooms at rates that allow them to make a profit on the price that they on sell them to holidaymakers or business travellers.

Webjet's business-to-business operations have delivered a superb 30% compound annual growth rate (CAGR) over the past five years, so it's no surprise it's looking to aggressively expand into the sector.

Its entrepreneurial CEO recently struck a separate deal with UK travel giant Thomas Cook to provide hotel booking services via its digital inventories.

However, the stock has shed 11 per cent over the last week after the company flagged a dispute with its auditor BDO over how to account for around $11 million in potential EBITDA related to the Thomas Cook deal.

As such investors will tread carefully around the stock, while its management will have to raise capital on a more dilutory basis than it might have anticipated.

Webjet will hand down its full year results to the market on August 31, 2017.

Motley Fool contributor Tom Richardson owns shares of Webjet Ltd. You can find Tom on Twitter @tommyr345 The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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