The Webjet Limited (ASX: WEB) share price opened 12 per cent higher this morning at $12.40 after the group returned to the ASX boards on completing the institutional component of a £200 million (A$330 million) capital raising.
The cash is being raised to buy UK-based business-to-business (B2B) travel operator Jac Travel in a deal that Webjet boasts would be 25 per cent earnings per share (EPS) accretive over FY 2017 on a pro forma basis, with no allowance for potential cost savings derived from the combination.
B2B businesses like Jac Travel and Webjet's FIT Ruums or Lots of Hotels effectively act as digital middleman between hoteliers and travel agents or tour operators looking to book hotel rooms at discounted rates to turn a profit on the amount they on sell them to holidaymakers or business travellers.
The price is reported to be 10.5x Jac Travel's FY 2017 adjusted EBITDA of £19 million which is a full multiple to pay, but reflects the perceived earnings growth profile of the business and potential EPS accretion.
Notably though Webjet advised that the EPS accretion is "dependent on the accounting treatment of the Thomas Cook agreement" which is a topic Webjet's management is currently disputing with its auditor BDO.
Retail investors have the opportunity to participate in the capital raising from August 10 on a 1 for 6 basis at $10 per share, which represents an 8.6% discount to the theoretical ex-rights price of $10.94 on August 1 2017 and around a 20 per cent discount to today's exchange traded price.
Travel stocks across the S&P/ASX 200 (Index: ^AJXO) (ASX: XJO) have performed well in 2017 and over the medium term with the likes of Corporate Travel Management Ltd (ASX: CTD) and Flight Centre Travel Group Ltd (ASX: FLT) all delivering thanks to their overseas strength and the ever-growing demand for travel services.
