The global financial crisis and weak Internet travel sector in Asia seem have caused Travelzoo Inc. to sell its Asia Pacific online division.
For the twelve months ended June 30, 2009, Travelzoo's Asia Pacific division reported incredibly low revenues of approximately USD1.5 million with an exceptionally high operating loss of approximately USD7.8 million.
"While we remain upbeat about business prospects in Asia Pacific, we believe we can currently create more shareholder value by redirecting and focusing our investments in other areas of the Travelzoo franchise where we see more compelling near-term growth opportunities, such as in Europe, North America, and our new Fly.com search engine," said Holger Bartel, Travelzoo's chief executive officer. "Consequently, we intend to sell our Asia Pacific division."
In connection with its plan to sell its Asia Pacific division, Travelzoo has signed a non-exclusive letter of intent and non-binding term sheet to sell substantially all of the division's assets to a company to be formed by Travelzoo's non-executive chairman, founder and majority stockholder, Ralph Bartel. Under the terms of the non-exclusive LOI, Travelzoo can solicit alternative offers for the Asia Pacific division and enter into negotiations for a more favorable offer. The company has established a special committee comprised of Travelzoo's three independent directors to oversee the sale process and advise the company's board of directors. Travelzoo is inviting parties that may be interested in bidding for its Asia Pacific division to contact the company.
Assuming Travelzoo successfully completes the sale of its Asia Pacific division, Travelzoo will no longer provide financing for operations in the region or fund any future operating losses of the Asia Pacific business, and thus will no longer be required to consolidate the financial results of the divested Asia Pacific division.
Under the terms of the LOI, should Travelzoo sell the division to Bartel's company, Travelzoo would receive a cash payment at closing along with an option to re-acquire the divested operations at fair market value sometime in the future. As part of the transaction, Bartel's company would receive limited licenses to portions of the company's intellectual property to support its operation of the Asia Pacific assets as part of a standalone company. Travelzoo's new Fly.com business is not part of the proposed transaction.
"Absent of a superior offer from another party, we anticipate closing a transaction with Mr. Bartel in a relatively short period of time, thereby conserving company capital for alternative uses," said David Ehrlich, one of the three independent directors making-up the special committee overseeing the sale process.
In recent weeks, online travel companies operating in Greater China have shown how they plan to ride out the difficult Internet travel environment in Asia. Et-china, a Guangzhou-based online travel company, announced that it acquired the Beijing-based Yoee.com, a leading online seller of air tickets in China, for an undisclosed amount. And Chinese Internet travel company eLong Inc. managed to only increase total gross revenues for the first quarter of 2009 by 1% year-on-year to CNY82.5 million — its net revenues increased 1% year-on-year to CNY77.8 million.
Chinese Internet travel company Ctrip.com International Ltd. is one of the few semi-bright spots in the Internet travel sector. Last week it formally announced the purchase of Taiwan rival ezTravel.com, and Ctrip.com reported total second quarter revenues of CNY508 million, representing a 26% increase from the same period in 2008 and an 18% increase from the previous quarter.