April 17, 2014

Southlake-based Sabre moves up in first day of trading on Nasdaq

The travel technology company, trading under the symbol SABR, priced its initial public offering at $16 a share, $2 less than expected.

Sabre Corp. returned to the stock market Thursday, moving up on its first day of trading after going public for a lower price than it expected.

The Southlake-based travel technology company, which owns, priced its public offering at $16 a share, $2 less than its targeted price, and raised $627 million. Several initial public offerings this week have raised less than expected because of a dip in the markets.

At the end of trading on the Nasdaq, Sabre (ticker: SABR) closed up 50 cents at $16.50 after trading as high as $17.17.

Sabre plans to use the proceeds to pay down debt, Chief Executive Officer Tom Klein said. He said the time was right for Sabre to re-enter the public markets after being privately held for seven years.

“We felt like the company was in great shape and it would be attractive for public shareholders,” Klein said. “Our software business has more than doubled, and we expect to have strong growth in our business overall.”

Klein said Sabre’s software and technology solutions help the $6.5 billion travel industry solve problems like how to route flights or track hotel inventory. Its TripCase mobile application, which has been primarily geared toward consumers, recently launched a corporate travel version that will be used by General Electric and its employees to manage business trips.

This is the second time Sabre has run with the bulls and bears on Wall Street. The company was originally part of AMR Corp., the former parent of American Airlines, and was spun off as a separate public company in 2000.

It was taken private in 2007 in a $5 billion buyout led by Fort Worth-based TPG Capital and Silver Lake Funds. The private equity companies will retain a 79 percent stake.

Sabre was created at American as the airline replaced its handwritten ticket system with an automated reservation system. The company, which has posted annual losses since 2008, reported a $100 million net loss in 2013 on $3.05 billion in revenue. Sabre has 10,000 employees, including 3,000 at its Southlake headquarters.

In August, Klein, then the company’s president, was named to replace Sam Gilliland as CEO. That same month, Sabre entered into a long-term marketing agreement with rival Expedia to handle the technology platform behind the Travelocity website and give it access to Expedia’s supply and customer service platforms.

Henry Harteveldt, an analyst with Atmosphere Research, said he expects Sabre to sell Travelocity to Expedia as the company has exited some business markets where it was not performing well. Although its traditional ticket distribution systems for airlines and travel agencies continue to contribute significant revenue, Harteveldt said, Sabre needs to create innovative software elsewhere in the travel industry.

“Sabre is going to have to focus on the areas that are high-growth and high-margin such as travel-related [information technology] services in the airlines, in hospitality and other parts of the travel business,” Harteveldt said. “There are more growth opportunities in hotels than in airlines, and I think that’s a huge opportunity for Sabre to pursue for growth and where it has a reasonable chance for success.”

The company has also been involved in several antitrust lawsuits, alleging that Sabre monopolizes the U.S. global distribution market.

In 2012, it settled a lawsuit with American, paying the airline $347 million as part of the agreement. It is still in a legal battle with US Airways, which merged with American in December, and faces an antitrust investigation by the Justice Department.

However, it recently signed a contract with American to integrate its existing reservation systems with US Airways’.

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