American Express Global Business Travel, seeing its sales more than halved from the pandemic, could now also lose out on a purchase by private equity firm Carlyle Group and Singapore-based GIC, a sovereign wealth fund.
The two firms are reportedly backing out and claiming AmEx had violated several of the terms of the agreement, sources said. In a Delaware court filing last week, the firms claimed AmEx had been planning to use the investment to fund operating losses. AmEx denied that.
The deal, planned to happen for $5 billion including debt, was announced in December and supposed to close Thursday.
But in April, that started to crumble when Carlyle began to think that the coronavirus-related shutdowns and effects on the travel industry could constitute a “material adverse effect.” Carlyle’s position was that the travel industry would be near worthless, which AmEx didn’t agree with. But a Carlyle spokesperson said the company was “seeking a judicial confirmation that we have no obligation to close the transaction.”
A third party acting on behalf of the sellers has filed suit to try and compel Carlyle and GIC to go through with the deal anyway. The company isn’t party to the dispute.
A spokesperson for AmEx Global Business Travel said the backing-out of GIC and Carlyle “neither impacts GBT’s ability to manage through the current environment nor constrains any future opportunity.”
A loan to AmEx Global Business Travel for $1.2 billion, intended to go towards paying stakeholders and funding the possible acquisition, may also be in jeopardy if the deal with Carlyle falls apart.
Global Business Travel is 50 percent owned by credit card company American Express. In 2014, the credit card company sold the other half to a collective led by investment group Centares, which is the half Carlyle and GIC agreed to purchase some of last year.
The coronavirus pandemic’s disruption of most retail businesses has led to dissolution of other such deals. In April, Sycamore Partners began looking for an out on a deal to buy Victoria’s Secret. Sycamore Partners claimed that Victoria’s Secret parent L Brands violated that deal by furloughing staff and not paying rent.
