Carlyle Group Inc. and Singapore sovereign-wealth fund GIC Pte. Ltd. are backing out of a deal to buy a stake in American Express Global Business Travel, which has suffered losses from the Covid-19 pandemic.
The parties were in talks to renegotiate terms of the deal, which was set to close this week, in an effort to keep it from falling apart. But the groups couldn’t reach an agreement, according to people familiar with the matter, who spoke on the condition of anonymity because they weren’t authorized to speak publicly about the dispute.
The deal, announced at the end of 2019, valued the American Express Co. unit at $5 billion, including debt. Carlyle and GIC agreed to purchase a 20% stake and American Express retained 50% ownership.
The pandemic has roiled the travel industry, with companies suffering huge revenue drops, prompting worker layoffs. The American Express unit offers travel services primarily to businesses that book airfare and hotel rooms.
The corporate travel business was growing before the advent of Covid-19, generating $5.7 trillion in annual revenue and creating 319 million jobs. Companies spent more than $305 billion on travel in 2018, a 4.5% gain from the year earlier, according to Bloomberg Intelligence, citing data from the Global Business Travel Association.
American Express Global Business Travel has “the backing of strong, long-term investors and have taken appropriate actions to reduce operating costs in the current environment,” the company said in a statement. “There are absolutely no concerns about liquidity.”
An investment group, which includes Certares LP and the Qatar Investment Authority, own the other half of the business-travel joint venture.
A unit of the Qatari agency sued Carlyle in Delaware Chancery Court last week seeking to force the investment firms to “comply with their contractual obligation to proceed to the closing of a share purchase agreement,” according to a court filing. The unit is asking Chancery Judge Joseph Slights III to put the case on the fast track for trial.
Carlyle countersued May 8, arguing it could renege on the agreement because other investors violated “various provisions of the share purchase agreement,” Carlyle’s lawyers said in a court filing.
“The sellers violated several terms of the purchase agreement and as a result we are seeking a judicial confirmation that we have no obligation to close the transaction,” Brittany Berliner, a Carlyle spokeswoman, said in an emailed statement.
The Delaware cases are Carlyle Roundtrip, LP v. Juweel Investors, No. 2020-0351, Delaware Chancery Court and Juweel Investors Limited v. Carlyle Roundtrip, LP, No. 2020-0338, Delaware Chancery Court (Dover).