Stock sale on itinerary for Sabre AMR to offer 20% of shares to public 08/09/1996 The Dallas Morning (Copyright 1996)
AMR Corp., parent of American Airlines Inc., said Thursday it plans to sell part of its Sabre Group to the public, ending months of speculation about the company's plans for Sabre.
Fort Worth-based AMR will sell about 20 percent of the stock in Sabre Group Holdings Inc., the most profitable of AMR's major units. It includes the Sabre Travel Information Network, the leading computer
reservation system used by about 30,000 U.S. travel agents.
Analysts had predicted that Sabre would be sold or spun off because AMR's stock price didn't reflect Sabre's value.
"Although AMR owns a highly successful information technology company Sabre}, that was not reflected in the stock price," said Mike Durham, chief executive officer of the Sabre Group. "By taking our light
from underneath the basket, we create the likelihood that Sabre's value will be reflected in the marketplace."
It remains to be seen what value the market will place on Sabre, but analysts say it is in the range of $50 to $55 a share, or about $4 billion. Wall Street investors apparently like the transaction, pushing AMR stock
up $4.50 a share Thursday to $86.25 on a day the overall stock market was down.
"AMR was getting a lot of heat from the investment community about unlocking shareholder value," said John Pincavage, a stock analyst at Dillon Read. "This obviously relieves that pressure and allows the
company to say we have an asset worth a certain amount."
Also, by distancing itself from American, Sabre will be able to grow faster and compete better for service contracts with companies that are American's competitors. "People don't want to do business that is owned
by a competitor," said Mr. Durham.
The public stock offering is expected to raise $550 million, according to a filing with the Securities and Exchange Commission. Most of the proceeds from the offering will be used to repay debt that Sabre owed to AMR.
Mr. Durham said he doesn't know whether AMR's board of directors will sell any more of Sabre. But often companies that do a small public offering of a subsidiary subsequently spin off the rest of it.
David Menlow, president of the IPO Financial Network in Springfield, N.J., said he likes the deal and expects it to be well received by investors. But Steven Samblis , Samblis in Longwood, Fla., was less optimistic. He said he has found the Sabre system slow and cumbersome, and it hasn't saved him money.
"I've had better luck calling a travel agent," he said. "In travel, the personal touch is still important."
Sabre originally was a division of American Airlines, but in April, AMR reorganized Sabre as a separate unit. That move increased speculation that AMR planned to sell all or a portion of Sabre.
Last year, Sabre's $1.7 billion in sales accounted for about 10 percent of AMR's $16.91 billion in total revenue. But Sabre generally has been the more profitable part of AMR. In 1995, the Sabre units showed a pretax profit of $382 million. The much larger Airline Group reported a $564 million operating profit, but that gain was wiped out by $600 million in nonoperating expenses.
The Sabre units include the Sabre Travel Information Network; Sabre Computer Services, one of the largest privately owned computer systems worldwide; Sabre Decision Technologies, which schedules flights and crews; and Sabre Interactive, which markets travel products through online services such as CompuServe and America Online. Although investors seemed pleased with the Sabre transaction, Mr. Pincavage said AMR still has to make money with its airline operations. "That was true yesterday, and it's still true today," he said. |
