AMEX buys Rosenbluth

1 August 2003

Corporate travel management companies are watching cautiously from the sidelines the recent acquisition of Rosenbluth International by American Express, paving the way for Amex to further consolidate its position as the world's largest corporate travel management company.

Rosenbluth, a privately held company, owns and/or manages corporate travel operations in 15 countries, posted business travel expenditure of more than US$3 billion last year.

American Express booked global travel volume of US$15.5 billion last year. The new AMEX is estimated to handle about US$20 billion in worldwide T&E expenditure.

American Express is the largest agency in the US while Rosenbluth is the fifth biggest. A mega-merger of this sort would surely send shivers, especially coming at a time when the economy is recovering from a slowdown that began three years ago.

Industry watchers are acknowledging that consolidation in the industry is not far away. Most corporate travel industry players preferred to reserve comments.

The companies did not disclose terms of the deal, which could be completed within a few months, pending regulatory approval.

Under the agreement, Amex is buying all of the Philadelphia-based company's shares, but Rosenbluth will maintain control of UpStream, an outsourced call centre that provides support for its clients. The Rosenbluth name will eventually disappear.

Amex said the deal will help them negotiate better terms for their corporate clients.

"In a tough economy, travel management services have been in great demand, as companies of all sizes have focused on reducing travel expenses by lowering both the cost of the travel process and the cost of travel itself," Amex said.

"In this environment, the most successful travel management firms require both size and scope. They also are able to negotiate effectively for savings from suppliers and have the resources and scale to invest in the latest technology tools."

Having a global presence would give Amex the edge in winning global accounts from MNCs. Rosenbluth is not seen as a major player in Asia. Observers said Rosenbluth had lost its competitiveness and being a family-owned business didn't make things easier.

Synergi vice president, Asia/Pacific Steve Lovato (above), who headed Rosenbluth's Asia/Pacific division from 1994-1997, said the writing was on the wall.

"Amex had long pursued Rosenbluth so my conclusion is that the Rosenbluth family just got tired of the problems and gave in to the offer to buy."

In Asia, Rosenbluth's disappearance isn't expected to reduce the choice of travel management companies for corporate clients. Players like BTI, Synergi, Carlson Wagonlit have a presence here as well as newer regional entrants like TQ3 and Navigant.

Of course, Amex is already a major player in this region.

One of the casualties of the merger is the joint ventures that Rosenbluth has with its partners in China, Hong Kong and Taiwan. Understandably, all existing agreements will be cancelled when the Rosenbluth brand ceases to exist in markets in this region.

Last year, Rosenbluth and China Comfort, one of China's top travel agencies, had set up a joint venture to exploit the booming Chinese business. It was one of the first business travel joint ventures in China. Sources said that the Hong Kong and Taiwan deals with Swire are being wound up and all joint bids will cease.

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