Have Gun, Will Travelport

Elliott buys Travelport for $4.4 billion

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What's going on?

Activist investor Elliott Management announced on Monday that it’s teaming up with another investor to buy Travelport, a travel technology company, for $4.4 billion.

What does this mean?

Activist investors buy up a sizable chunk of a company and then use their position to influence said company’s strategy. Elliott bought 12% of Travelport, which provides a variety of snazzy digital services to travel firms, back in March. It then pushed the company to consider selling itself, which it’s now doing… to Elliott and friends.

As companies typically get bought out for more than their current share price (in order to encourage existing shareholders to sell), investors sensing easy money had bought Travelport’s stock, sending its price up. But Elliott bided its time, and may now snag the business for a relative bargain: much less than it was worth in April and only slightly more than its share price on Friday.

Why should I care?

For markets: Elliott’s practiced this maneuver.

Elliott, together with another investor, bought healthcare tech company Athenahealth earlier this year after forcing the departure of its founder and CEO. And Elliott pulled a similar trick with Italian soccer club AC Milan, taking it over after lending it money that wasn’t repaid. Investors sometimes buy up a stock when they get wind of big-name activist involvement – but the activists’ main responsibility is to the clients whose money they’re investing. There’s no guarantee that activists’ actions will benefit those riding on their coattails – as Travelport’s investors are now only too aware.

The bigger picture: Activation stations.

Third Point Management, another activist investor, recently pushed industrial conglomerate United Technologies to split itself into three – as well as settling a power struggle at Campbell Soup. And Elliott’s been even more, well, active this year, both at Whitbread – where it got the sale that it was gunning for, pushing Whitbread’s share price up and giving investors a windfall – and at TV ratings tracker Nielsen.

Originally posted as part of the Finimize daily email.

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