Issues & Trends – September 2010

The Stella-JTG powerhouse gets the green light from the ACCC

THE merger between Jetset Travelworld Group and Stella Travel Services is going ahead after the Australian Consumer and Competition Commission (ACCC) gave it the all clear on September 1 and JTG shareholders voted in favour on September 6.

At press time, Foreign Investment Review Board approval was also required but this was expected before the end of the month.

Stella’s current chief executive Peter Lacaze will officially take over as chief executive of Australian travel’s new retail/wholesale powerhouse on October 1 which, he said, “is when the real work will begin”.

JTG shareholder approval had been widely regarded as a foregone conclusion: The majority shareholders were in favour and the independent experts’ report, prepared by Deloitte, concluded the merger “is fair and reasonable and therefore in the best interests of JTG shareholders”, said JTG chairman Tom Dery who will continue as chairman of the merged entity.

However ACCC approval was cast into doubt in July when the competition regulator released a statement of issues asserting that the merger had the potential to raise competition concerns. The commission also encouraged concerned travel industry members to come forward and put their case. It was clear that JTG-Stella had some more explaining to do before the ACCC would pass their proposed merger.

At the time JTG-Stella executives remained outwardly confident that they had the answers to the ACCC’s concerns. And the ACCC’s subsequent approval seemingly vindicates the comment of a senior Stella executive to travelBulletin that the statement of issues actually comprised a series of green lights and only a small number of amber lights.

Announcing the go-ahead for the merger, commission chairman Graeme Samuel said: “The ACCC conducted an extensive review of this transaction to ensure that it would not adversely impact Australian travellers.

“After looking very closely at the issues, the ACCC found that the merged Jetset-Stella entity and its member agents are likely to face continued and increasing competition from online travel agents, direct supply by airlines and hotels, and the largest travel retailer in Australia, Flight Centre.

The internet has dramatically affected the way competition works in the travel industry as more and more customers look online for the best deals.

“As a result not only are traditional bricks and mortar agents forced to compete harder on price and service to attract customers, but airlines, hotels and tour companies also have new ways of reaching those customers.

“In this context, the Jetset-Stella merger is unlikely to substantially lessen competition.”

The ACCC also concluded that Qantas owning a lesser interest in a larger retail group, when compared to the current interest Qantas holds in Jetset, is unlikely to substantially lessen competition.

As has been well publicised in earlier announcements, Qantas’ majority shareholding in JTG will convert to 29 per cent of the merged company and the Alysandratos family (owners of Consolidated Travel) will have a 12.6 per cent stake in the new entity.

On the Stella side, private equity company, CVC, and staff members, mainly Peter Lacaze, it is believed, will have substantial shareholdings.

• The existing credit facility between banker UBS and Stella is to be refinanced as Stella has been offered more attractive terms by “two major Australian financial institutions”.