Listed online reservations specialist CNG Travel has paid $12.5 million (€10 million) for a US competitor, Placestostay (PTS), the company said yesterday.
CNG, which is chaired by Dr Michael Smurfit and whose shareholders include the Mr Séamus Ross-controlled Menolly Group, said in a statement yesterday it had bought the brand and related assets of PTS from its owner, WorldRes Inc, an online hotel reservation network.
Under the terms of the deal, CNG had to pay $12 million up front, with a further €500,000 deferred for three months. The acquisition is effective from August 1st. CNG said it would enhance earnings in its first full year of operation.
Kenmare, Co Kerry-based CNG provides an online hotel booking service for mainly corporate travellers. The company says that four of the world's five biggest travel agents use its software, Travel Lodging Connector (TLC).
PTS locates and books hotel rooms for tourists. The company has access to rooms in 8,000 hotels in 140 countries.
Its purchase brings to over 24,000 CNG the hotels to which CNG has access, an increase of 50 per cent.
According to CNG's statement, in 2003 PTS generated 243,000 reservations, which yielded a gross margin of $4.9 million before costs.
CNG said yesterday that the purchase would, among other things, give the Irish company a foothold in the tourist travel market, which yields higher margins, and allow CNG to open its existing hotels to the leisure market.
CNG chief executive, Mr Finbarr Power, welcomed the purchase.
"PTS is a leading online hotel brand in the leisure sector and is an excellent first acquisition for CNG following our flotation this summer," he said.
"Upon completion of the acquisition, PTS will be integrated immediately."
However, the news failed to get a response from investors. CNG Travel's share price closed level on its opening quote at 85.50 pence on London's Alternative Investment Market last night.
The company floated on AIM last May, raising £22.1 million (€33 million) in the process. Its shares were floated at £1.05, but quickly fell by around 20 per cent and have not recovered to that level since.
Last month, CNG reported that it had a pre-tax loss of $1.5 million in 2003, a reduction of almost 90 per cent on 2002, when it lost $12 million.
However, total losses for the year were $2.57 million, this combined with a non-cash foreign currency loss of $1.67 million, left its profit and loss account in the red by $18.8 million, compared with $14.6 million the previous year.
The company had sales of $28.8 million during the year, compared with $5.3 million in 2002.
The jump in turnover was largely due to a contribution from its US acquisition, Tzell.
The Menolly Group holds 29.9 per cent of CNG and Mr Seamus Ross junior, a son of that company's founder, is a director. Mr Power holds 12.09 per cent.
