Services giant EDS has announced plans to acquire the outsourcing divisionof airline booking firm Sabre, for $670m.
In addition to the agreement, Sabre awarded EDS a 10-year, $2.2bn servicecontract, under which some 4200 Sabre employees, mostly in the US, willtransfer to EDS.
EDS plans to combine Sabre's software products and travel marketing anddistribution expertise with its core capabilities in systems integration.The two companies will jointly market IT products and services to the traveland transportation industries.
EDS chairman and chief executive, Dick Brown, said: "This transaction is asubstantial win for EDS shareholders. It capitalises on our global ITinfrastructure scale, and strengthens EDS's position in an industry in whichIT spending is estimated at between $9bn and $10bn this year."
The services giant will purchase Sabre's airline infrastructure outsourcingassets, resources and contracts, as well as internal IT assets. Sabre willretain net working capital of $108m.
EDS said it would add carriers such as American Airlines and US Airways toits existing list of airline clients that includes British Airways,Continental Airlines, Virgin Atlantic and Mexicana.
In addition, EDS said it will finance the deal with its existing creditfacilities. The company is expected to start reporting revenue from the dealduring its third quarter of fiscal 2001. The deal is expected to be worth$150m in business for EDS per quarter for each of the final two quarters ofthe fiscal year.
As part of the joint agreement, EDS will contribute approximately $20m overthe next two years for product development in Sabre's software business,primarily to evolve its airline software suite to an application serviceprovider model.
Jim Dellum, president of EDS's global transportation industry practice,said: "With the consolidations occurring within the transportation industry,we see a significant need for this type of IT service in the competitiveenvironment, even with the economic slowdown."
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