AMR to spin off Sabre unit
AMR, the parent company of American Airlines, today said it would spin-off its 83 percent share of computer services and travel-related firm Sabre Holdings.
About 17 percent of Fort Worth, Texas-based Sabre, the giant computer-based reservation system for travel agents, is already publicly traded. But once fully capitalized on the public capital market, Sabre will be able to leap with the same fervor as other Internet companies into a high-budget marketing campaign, and pursue mergers and acquisition bids considered vital by some for success in the Internet world.
Sabre is hoping to position Travelocity.com, its Internet-based travel service subsidiary, as a dominant force in the Internet travel sector.
In October, Sabre moved to merge Travelocity with rival Preview Travel, based in San Francisco. Just last week, Priceline.com, Travelocity.com and Preview Travel teamed up, hoping to bolster their positions against Microsoft's recently spun-off Expedia travel site.
"The spin-off will also allow Sabre--and Sabre's subsidiary, Travelocity.com--to capitalize on numerous opportunities in the rapidly evolving technology sector," Donald Carty, AMR's chief executive, said in a statement.
In related news, Sabre said it had tapped William Hannigan as its new president and chief executive beginning immediately. Hannigan was previously president of SBC Global Markets at Southwestern Bell, according to Sabre.
The company also said that AMR's stock price has often not reflected the full value of both American Airlines and Sabre.
"By having two completely separate companies valued in the market, both AMR and Sabre should benefit from clearer market comparisons with their peers,'' Carty said. "This should result in a stock price for both companies that more appropriately reflects their full value and potential.''
AMR will distribute 107 million shares of Sabre common stock to AMR shareholders, with AMR shareholders receiving about 0.7 shares of Sabre stock for each AMR stock owned. The spin-off is expected to be completed in the first quarter of 2000. The company is hoping the transaction will be approved by the Internal Revenue Service to be tax-free to AMR and its shareholders for U.S. federal income tax purposes.
In 1996 AMR reorganized Sabre, which was at the time part of American Airlines, into a separate subsidiary and took about 18 percent of it to the public market. Sabre and American Airlines have had an agreement in which Sabre provides the airline with all its information technology needs.
After the spin-off, Sabre will continue to provide services for reservations and other real-time services to American Airlines until 2008.
Prior to the spin-off, Sabre will pay a special, one-time $675 million cash dividend, or approximately $5.21 per share, to its shareholders, including AMR.